Exhibit 10.14


 


LOAN AGREEMENT


 


Dated as of February 18, 2004


 


by and among


 


ARC COMMUNITIES 11 LLC




as Borrower,


 




and


 


CITIGROUP GLOBAL MARKETS REALTY CORP.


 

















 


LIST OF SCHEDULES


 


	
  1

  	
  –

  	
  Immediate Repairs Reserved
  for in Deferred Maintenance Escrow Account

  
	
  2

  	
  –

  	
  Organizational Chart

  
	
  2.17

  	
  –

  	
  Allocated Loan Amounts

  
	
  3

  	
  –

  	
  Homesites as of the
  Closing Date

  
	
  4

  	
  –

  	
  Exceptions to
  Representations and Warranties

  
	
  5

  	
  –

  	
  Addresses for Notices

  
	
  6

  	
  –

  	
  Work Reserve Funding
  Conditions for Deferred Maintenance Escrow Account

  
	
  7

  	
  –

  	
  Leases with Affiliated
  Borrowers

  
	
  8

  	
  –

  	
  Form of Quarterly
  Statement

  
	
  9

  	
  –

  	
  Form of Monthly Statement

  
	
  10

  	
  –

  	
  Form of Standard Lease as
  of the Closing Date

  



 


i

















 


LOAN AGREEMENT


 


THIS
LOAN AGREEMENT, made as of February     , 2004, is by and
among ARC COMMUNITIES 11 LLC, a Delaware limited liability company, having an
address at 600 Grant Street, Suite 900, Denver, Colorado 80203 (“Borrower”),
and CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation, having an
address at 388 Greenwich Street, 11th Floor, New York, New York 10013 (together
with its successors and assigns, whether one or more, “Lender”).


 


RECITALS


 


WHEREAS,
Borrower desires to obtain from Lender the Loan in an amount equal to the Loan
Amount (each as hereinafter defined) to, with respect to certain of the
Mortgaged Property (as hereinafter defined), finance a portion of the
acquisition cost of, and, with respect to other of the Mortgaged Property,
refinance existing debt at such Mortgaged Property and to pay certain other
fees and expenses;


 


WHEREAS,
Lender is unwilling to make the Loan unless Borrower executes and delivers this
Agreement, the Note and the Loan Documents (each as hereinafter defined) to
which it is a party which shall establish the terms and conditions of, and
provide security for, the Loan; and


 


WHEREAS,
Borrower has agreed to establish certain accounts and to grant to Lender, a
security interest therein upon the terms and conditions of the security
agreement set forth in Section 2.15.


 


NOW,
THEREFORE, in consideration of the making of the Loan by Lender and for other
good and valuable consideration, the mutual receipt and legal sufficiency of
which are hereby acknowledged, the parties hereby covenant, agree, represent
and warrant as follows:


 


ARTICLE I.

CERTAIN DEFINITIONS


 


Section
1.1.                                   Definitions.  For all purposes of this
Agreement:  (1) the capitalized terms
defined in this Article 1 have the meanings assigned to them in this Article
1 and include the plural as well as the singular; (2) all accounting terms
have the meanings assigned to them in accordance with GAAP (as hereinafter
defined); (3) the words “herein”, “hereof”, and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, or other subdivision; and (4) the following terms have the
following meanings:


 


“Account
Collateral” has the meaning set forth in Section 2.15(a) hereof.


 


“Accounts”
means all accounts (as defined in the relevant UCC), now owned or hereafter
acquired by Borrower, and arising out of or in connection with, the operation
of the Mortgaged Property and all other accounts described in the Management
Agreement and all


 

















 


present and future accounts receivable,
inventory accounts, chattel paper, notes, insurance policies, Instruments,
Documents or other rights to payment and all forms of obligations owing at any
time to Borrower thereunder, whether now existing or hereafter created or
otherwise acquired by or on behalf of Borrower, and all Proceeds thereof and
all liens, security interests, guaranties, remedies, privileges and other
rights pertaining thereto, and all rights and remedies of any kind forming the
subject matter of any of the foregoing.


 


“Affiliate”
of any specified Person means any other Person (i) controlling or controlled by
or under common control with such specified Person; (ii) directly or indirectly
owning or holding ten percent (10%) or more of any equity interest in the first
Person; or (iii) ten percent (10%) or more of whose equity interests are
directly or indirectly owned or held by the first Person.  For the purposes of this definition,
“control” when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities or other beneficial
interests, by contract or otherwise; and the terms “controlling” and
“controlled” have the meanings correlative to the foregoing.


 


“Agreement”
means this Loan Agreement, together with the Schedules and Exhibits hereto, as
the same may from time to time hereafter be modified, supplemented or amended.


 


“Appraisal”
means each appraisal with respect to an individual Mortgaged Property prepared
by an Appraiser in accordance with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation, in compliance with the
requirements of Title 11 of the Financial Institution Reform, Recovery and
Enforcement Act and utilizing customary valuation methods such as the income,
sales/market or cost approaches.


 


“Appraiser”
means a nationally recognized MAI appraiser selected by Borrower and reasonably
approved by Lender.


 


“Approved
Capital Expenditures” has the meaning set forth in Section 2.13(a)(iii)
hereof.


 


“Assignment
of Rents and Leases” means, with respect to the Mortgaged Property, an
Assignment of Rents and Leases (and, if there are more than one, each and every
one of them), dated as of the Closing Date, granted by the Borrower to Lender
with respect to the Leases, as same may thereafter from time to time be
supplemented, amended, modified or extended.


 


“Assumed
Loan Debt Service” means the greater of (i) the product of the Monthly Debt
Service Payment Amount multiplied by twelve (12) and (ii) the product of the
Principal Indebtedness multiplied by a market constant of 0.075.


 


“Basic
Carrying Costs” means the following costs with respect to the Mortgaged
Property:  (i) Impositions and (ii)
insurance premiums for policies of insurance required to be maintained by Borrower
pursuant to this Agreement or the other Loan Documents.


 


“Borrower”
has the meaning provided in the first paragraph of this Agreement.


 


2

















 


“Business
Day” means any day other than a Saturday, a Sunday or a day on which
commercial banks in the State of New York are authorized or obligated by law,
governmental decree or executive order to be closed.


 


“Capital
Improvement Costs” means costs incurred or to be incurred in connection
with replacements and capital repairs made to the Mortgaged Property which
would be capitalized in accordance with GAAP.


 


“CERCLA”
has the meaning set forth in Section 5.1(d)(i) hereof.


 


“Chattel
Paper” means all of Borrower’s right, title and interest, whether now owned
or hereafter acquired, in, to and under all “chattel paper” as defined in the
UCC (whether tangible chattel paper or electronic chattel paper).


 


“Closing
Date” means the date of the funding of the Loan.


 


“Code”
means the Internal Revenue Code of 1986, as amended, and as it may be further
amended from time to time, any successor statutes thereto, and applicable U.S.
Department of Treasury regulations issued pursuant thereto in temporary or
final form.


 


“Collateral”
means, collectively, the Land, Improvements, Leases, Rents, Personalty, and all
Proceeds, and (to the full extent assignable) Permits, which is or hereafter
may become subject to a Lien in favor Lender as security for the Loan (whether
pursuant to the Mortgages, any other Loan Document or otherwise), all whether
now owned or hereafter acquired and all other property which is or hereafter
may become subject to a Lien in favor Lender as security for the Loan and
including all property of any kind described as part of the Mortgaged Property
under any of the Mortgages.


 


“Collateral
Security Instrument” means any right, document or instrument, other than
the Mortgages, given as security for the Loan, including, without limitation
and the Contract Assignment.


 


“Collection
Account” has the meaning set forth in Section 2.12(a) hereof.


 


“Collection
Account Agreement” means the Collection Account Agreement, dated as of the
applicable date and executed by Borrower, Lender and the Collection Account
Bank, relating to the Collection Account and the Reserve Accounts and any other
accounts maintained with the Collection Account Bank.


 


“Collection
Account Bank” means BancOne, N.A., or any successor financial institution
appointed by Lender.


 


“Condemnation
Proceeds” means, in the event of a Taking with respect to the Mortgaged
Property, the proceeds in respect of such Taking less any reasonable third
party out-of-pocket expenses incurred in prosecuting the claim for and
otherwise collecting such proceeds.


 


“Contest”
has the meaning set forth in Section 9.24(D)(1) hereof.


 


3

















 


“Contingent
Obligation” means, as used in the definition of Other Borrowings, without
duplication, any obligation of Borrower guaranteeing any indebtedness, leases,
dividends or other obligations (“primary obligations”) of any other
Person (the “primary obligor”) in any manner, whether directly or
indirectly.  Without limiting the
generality of the foregoing, the term “Contingent Obligation” shall
include any obligation of Borrower:


 


(i)                                     to purchase any such primary obligation or
any property constituting direct or indirect security therefor;


 


(ii)                                  to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor;


 


(iii)                               to purchase property, securities or services primarily for the purpose
of assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation; or


 


(iv)                              otherwise to assure or hold harmless the holder of such primary
obligation against loss in respect thereof.


 


The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming Borrower
is required to perform thereunder) as determined by Lender in good faith.


 


“Contract
Assignment” means, with respect to the Mortgaged Property, the Assignment
of Contracts, Licenses, Permits, Agreements, Warranties and Approvals, dated as
of the Closing Date and executed by the Borrower.


 


“Contracts”
means the Management Agreement and all other agreements to which Borrower is a
party or which are assigned to Borrower by the Manager in the Management
Agreement and which are executed in connection with the construction, operation
and management of the Mortgaged Property (including, without limitation,
agreements for the sale, lease or exchange of goods or other property and/or
the performance of services by it, in each case whether now in existence or
hereafter arising or acquired) as any such agreements have been or may be from
time to time amended, supplemented or otherwise modified.


 


“Debt
Service Coverage Ratio” means, as of any date of calculation with respect
to the Mortgaged Property, the quotient expressed to two decimal places of the
Underwritten Net Cash Flow divided by the Assumed Loan Debt Service.


 


“Debt
Service Coverage Test” means, as of the Closing Date, a test which shall be
satisfied if the Underwritten Net Cash Flow is at least equal to the product of
1.25 and the Assumed Loan Debt Service.


 


“Debt
Service Reserve Account” has the meaning set forth in Section 2.13(c).


 


4

















 


“Deed
of Trust Trustee” means the trustee under any Mortgage that constitutes a
“deed of trust” under applicable law.


 


“Default”
means the occurrence of any event which, but for the giving of notice or the
passage of time, or both, would be an Event of Default.


 


“Default
Rate” means the per annum interest rate equal to the lesser of (a) 5.0% per
annum in excess of the rate otherwise applicable hereunder and (b) the maximum
rate allowable by applicable law.


 


“Defeasance”
means any of a Total Defeasance or a Partial Defeasance.


 


“Defeasance
Collateral” shall mean Partial Defeasance Collateral or Total Defeasance
Collateral, as applicable.


 


“Defeasance
Collateral Account” has the meaning set forth in Section 2.7.


 


“Defeasance
Date” has the meaning set forth in Section 2.7.


 


“Defeased
Note” has the meaning set forth in Section 2.7.


 


“Deferred
Maintenance Escrow Account” has the meaning set forth in Section 2.13(a).


 


“Deposit
Account” means all of Borrower’s right, title and interest, whether now
owned or hereafter acquired, in, to and under all “deposit accounts” as defined
in the UCC.


 


“Disclosure
Certificate” has the meaning set forth in Section 5.1(w) hereof.


 


“Disclosure
Documents” has the meaning set forth in Section 5.1(w) hereof.


 


“Documents”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under all “documents” as defined in the UCC
(whether negotiable or non-negotiable) or other receipts covering, evidencing
or representing goods.


 


“EO13224”
has the meaning set forth in Section 4.1(v) hereof.


 


“Eligible
Account” means a separate and identifiable account from all other funds
held by the holding institution, which account is either (i) an account
maintained with a federal or state chartered depository institution or trust
company that (A) satisfies the Rating Criteria and (B) insures the deposits
made to such account through the Federal Deposit Insurance Corporation, or (ii)
a segregated trust account maintained with the corporate trust department of a
federal or state chartered depository institution or trust company subject to
regulations regarding fiduciary funds on deposit similar to Title 12 of the
Code of Federal Regulations Section 9.10(b) which, in either case, has
corporate trust powers, acting in its fiduciary capacity and in either case
having combined capital and surplus of at least $100,000,000 or otherwise
acceptable to the Rating Agencies.  An
Eligible Account shall not be evidenced by a certificate of deposit, passbook,
other instrument or any other physical indicia of ownership.  Following a


 


5

















 


downgrade below the Rating Criteria,
withdrawal, qualification or suspension of such institution’s rating, each
account must at Lender’s request promptly (and in any case within not more than
thirty (30) calendar days) be moved to a qualifying institution or to one or
more segregated trust accounts in the trust department of such institution, if
permitted.


 


“Engineer”
means an Independent Engineer selected by Borrower and reasonably approved by
Lender.


 


“Environmental
Auditor” means an Independent environmental auditor selected by Borrower
and reasonably approved by Lender.


 


“Environmental
Claim” means any notice, notification, request for information, claim,
administrative, regulatory or judicial action, suit, judgment, demand or other
written communication (whether written or oral) by any Person or Governmental
Authority alleging or asserting liability with respect to Borrower or any
Mortgaged Property (whether for damages, contribution, indemnification, cost
recovery, compensation, injunctive relief, investigatory, response, remedial or
cleanup costs, damages to natural resources, personal injuries, fines or
penalties) arising out of, based on or resulting from (i) the presence, Use or
Release into the environment of any Hazardous Substance at any location
(whether or not owned, managed or operated by Borrower) that affects Borrower
or any Mortgaged Property, (ii) any fact, circumstance, condition or occurrence
forming the basis of any violation, or alleged violation, of any Environmental
Law or (iii) any alleged injury or threat of injury to human health, safety or
the environment.


 


“Environmental
Indemnity Agreement” means the Environmental Indemnity Agreement dated as
of the Closing Date, from Borrower and the Guarantor, collectively, as
indemnitor, to Lender, as indemnitee, as the same may be amended, modified or
supplemented from time to time.


 


“Environmental
Laws” means any and all present and future federal, state or local laws,
statutes, ordinances, rules or regulations, or any judicial interpretation
thereof, any judicial or administrative orders, decrees or judgments thereunder
issued by a Governmental Authority, and any permits, approvals, licenses,
registrations, filings and authorizations, in each case as now or hereafter in
effect, relating to the environment, human health or safety, or the Release or
threatened Release of Hazardous Substances or otherwise relating to the Use of
Hazardous Substances.


 


“Environmental
Reports” means each and every “Phase I Environmental Site Assessment” (and,
if applicable, “Phase II Environment Site Assessment”) as referred to in the
ASTM Standards on Environmental Site Assessments for Commercial Real Estate, E
1527-2000 and an asbestos survey, with respect to each Mortgaged Property,
prepared by one or more Environmental Auditors and delivered to Lender and any
amendments or supplements thereto delivered to Lender.


 


“Equipment”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under (i) all “equipment” as defined in the UCC,
and (ii) all of the following (regardless of how classified under the UCC):  all building materials, construction


 


6

















 


materials, personal property constituting
furniture, fittings, appliances, apparatus, leasehold improvements, machinery,
devices, interior improvements, appurtenances, equipment, plant, furnishings,
fixtures, computers, electronic data processing equipment, telecommunications
equipment and other fixed assets now owned or hereafter acquired by Borrower,
and all Proceeds of (i) and (ii) as well as all additions to, substitutions
for, replacements of or accessions to any of the items recited as aforesaid and
all attachments, components, parts (including spare parts) and accessories,
whether installed thereon or affixed thereto, all regardless of whether the
same are located on any Mortgaged Property or are located elsewhere (including,
without limitation, in warehouses or other storage facilities or in the
possession of or on the premises of a bailee, vendor or manufacturer) for
purposes of manufacture, storage, fabrication or transportation and all
extensions and replacements to, and proceeds of, any of the foregoing.


 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time, and the regulations promulgated thereunder.  Section references to ERISA are to ERISA, as in effect at the
date of this Agreement and, as of the relevant date, any subsequent provisions
of ERISA, amendatory thereof, supplemental thereto or substituted therefor.


 


“ERISA
Affiliate” means any corporation or trade or business that is a member of
any group of organizations (i) described in Section 414(b) or (c) of the Code
of which Borrower is a member and (ii) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code
and the lien created under Section 302(f) of ERISA and Section 412(n) of the
Code, described in Section 414(m) or (o) of the Code of which Borrower is a
member.


 


“Event
of Default” has the meaning set forth in Section 7.1 hereof.


 


“First
Open Defeasance Date” shall mean the earlier of (i) the Payment Date in
March, 2008, or (ii) the date that is two (2) years from the “start up day”
(within the meaning of Section 860G(a)(9) of the IRC) of the REMIC Trust
established in connection with the final Securitization involving the Loan.


 


“First
Open Prepayment Date” is the Payment Date which is in the second month
preceding the month in which the Scheduled Maturity Date occurs.  For example, if the Scheduled Maturity Date
is February 1, 2013, the First Open Prepayment Date is the Payment Date in the
month of December, 2012.


 


“First
Payment Date” has the meaning set forth in Section 2.5 hereof.


 


“Fiscal
Year” means the 12-month period ending on December 31st of each year (or,
in the case of the first fiscal year, such shorter period from the Closing Date
through such date) or such other fiscal year of Borrower as Borrower may select
from time to time with the prior consent of Lender.


 


“Fitch”
means Fitch, Inc. and its successors.


 


“Foreign
Lender” has the meaning set forth in Section 2.10(b) hereof.


 


7

















 


“Fund”
has the meaning set forth in the definition of “Permitted Investments”.


 


“Funding
Losses” has the meaning set forth in Section 2.5(e) hereof.


 


“GAAP”
means generally accepted accounting principles in the United States of America
as of the date of the applicable financial report, consistently applied.


 


“General
Intangibles” means all of Borrower’s right, title and interest, whether now
owned or hereafter acquired, in, to and under (i) all “general intangibles” as
defined in the relevant UCC, now owned or hereafter acquired by Borrower and
(ii) all of the following (regardless of how characterized):  all agreements, covenants, restrictions or
encumbrances affecting the Mortgaged Property or any part thereof.


 


“Governmental
Authority” means any nation or government, any state, county, municipality
or other political subdivision thereof or any governmental body, agency,
authority, department or commission (including, without limitation, any taxing
authority) or any instrumentality or officer of any of the foregoing
(including, without limitation, any court or tribunal) exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any corporation, partnership or other entity directly or
indirectly owned or controlled by the foregoing.


 


“Gross
Revenue” means, for any period, the total dollar amount of all income and
receipts received by, or for the account of, Borrower in the ordinary course of
business with respect to the Mortgaged Property, but excluding Loss Proceeds
(other than the proceeds of business interruption insurance or the proceeds of
a temporary Taking in lieu of Rents which shall be included in Gross Revenue).


 


“Guarantor”
means Affordable Residential Communities Inc., a Maryland corporation, and
Affordable Residential Communities LP, a Delaware limited partnership, on a
joint and several basis.


 


“Guaranty
of Nonrecourse Obligations” means, with respect to the Loan, the Guaranty
of Nonrecourse Obligations guaranteeing the exceptions to the nonrecourse
provisions of the Loan Documents for which liability is retained as described
in Section 9.24 hereof from the Guarantor to Lender.


 


“Hazardous
Substance” means, collectively, (i) any petroleum or petroleum products or
waste oils, explosives, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls (“PCBs”), lead in drinking water,
lead-based paint and radon, (ii) any chemicals or other materials or substances
which are now or hereafter become defined as or included in the definitions of
“hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely
hazardous wastes”, “restricted hazardous wastes”, “toxic substances”, “toxic
pollutants”, “contaminants”, “pollutants” or words of similar import under any
Environmental Law, and (iii) any other chemical or any other hazardous material
or substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.


 


8

















 


“Homesites”
means, with respect to each Mortgaged Property, the manufactured housing sites
located thereon which are capable of being leased to a Person to accommodate a
manufactured or mobile home, the number of each of which is set forth on Schedule
3 attached hereto, as such number may be updated from time to time with the
mutual written agreement of Lender and Borrower.  Such schedule shall include a breakdown of manufactured housing
sites that are capable of accommodating single and double wide manufactured
homes, to the extent such information is reasonably available to the Borrower.


 


“Immediate
Repairs” has the meaning set forth in Section 2.13(a)(ii) hereof.


 


“Impositions”
means all taxes (including, without limitation, all real estate, ad valorem,
sales (including those imposed on lease rentals), use, single business, gross
receipts, value added, intangible transaction privilege, privilege or license
or similar taxes), assessments (including, without limitation, all assessments
for public improvements or benefits, whether or not commenced or completed
within the term of the Loan), ground rents, water, sewer or other rents and
charges, excises, levies, governmental fees (including, without limitation,
license, permit, inspection, authorization and similar fees), and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen, in respect of each Mortgaged Property
(including all interest and penalties thereon), accruing during or in respect
of the term hereof and which may be assessed against or imposed on or in
respect of or be a Lien upon (1) Borrower (including, without limitation, all
income, franchise, single business or other taxes imposed on Borrower for the
privilege of doing business in the jurisdiction in which each Mortgaged
Property, or any other collateral delivered or pledged to Lender in connection
with the Loan, is located) or Lender, or (2) any Mortgaged Property, or any
other collateral delivered or pledged to Lender in connection with the Loan, or
any part thereof or any Rents therefrom or any estate, right, title or interest
therein, or (3) any occupancy, operation, use or possession of, or sales from,
or activity conducted on, or in connection with any Mortgaged Property or the
leasing or use of any Mortgaged Property or any part thereof, or the
acquisition or financing of the acquisition of any Mortgaged Property by
Borrower.


 


“Improvements”
means all buildings, structures, fixtures and improvements now or hereafter
owned by Borrower of every nature whatsoever situated on any Land constituting
part of the Mortgaged Property (including, without limitation, all gas and
electric fixtures, radiators, heaters, engines and machinery, boilers, ranges,
elevators and motors, plumbing and heating fixtures, carpeting and other floor
coverings, water heaters, awnings and storm sashes, and cleaning apparatus
which are or shall be affixed to the Land or said buildings, structures or
improvements and including any additions, enlargements, extensions,
modifications, repairs or replacements thereto).


 


“Indebtedness”
means the Principal Indebtedness, together with all other obligations and
liabilities due or to become due to Lender pursuant hereto, under the Note or
in accordance with any of the other Loan Documents, and all other amounts, sums
and expenses paid by or payable to Lender hereunder or pursuant to the Note or
any of the other Loan Documents.


 


“Indemnified
Parties” has the meaning set forth in Section 5.1(i).


 


9

















 


“Independent”
means, when used with respect to any Person, a Person that (i) does not have
any direct financial interest or any material indirect financial interest in
Borrower or in any Affiliate of Borrower, (ii) is not connected with Borrower
or any Affiliate of Borrower as an officer, employee, trustee, partner,
director or person performing similar functions, and (iii) is not a member of
the immediate family of any Person described in clauses (i) or (ii).


 


“Independent
Manager” has the meaning set forth in Section 8.1(ee).


 


“Instruments”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under all “instruments” as defined in the UCC.


 


“Insurance
Escrow Account” has the meaning set forth in Section 2.13(b).


 


“Insurance
Premiums” has the meaning set forth in Section 5.1(x)(iii).


 


“Insurance
Proceeds” means, in the event of a casualty with respect to the Mortgaged
Property, the proceeds received under any insurance policy applicable thereto.


 


“Insurance
Requirements” means all material terms of any insurance policy required
pursuant to this Agreement or any of the Mortgages and all material regulations,
rules and other requirements of the National Board of Fire Underwriters or such
other body exercising similar functions applicable to or affecting the
Mortgaged Property or any part thereof or any use or condition thereof.


 


“Insured
Casualty” has the meaning set forth in Section 5.1(x)(iv)(B).


 


“Intellectual
Property” means all of Borrower’s right, title and interest, whether now
owned or hereafter acquired, in, to and under the trademark licenses,
trademarks, rights in intellectual property, trade names, service marks and
copyrights, copyright licenses, patents, patent licenses or the license to use
intellectual property such as computer software owned or licensed by Borrower
or other proprietary business information relating to Borrower’s policies, procedures,
manuals and trade secrets.


 


“Interested
Parties” has the meaning set forth in Section 5.1(w) hereof.


 


“Inventory”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under all “inventory” as defined in the UCC and
shall include all Documents representing the same.


 


“Investment
Property” means all of Borrower’s right, title and interest, whether now
owned or hereafter acquired, in, to and under all “investment property” as
defined in the UCC.


 


“IRS”
has the meaning provided in Section 2.10(b) hereof.


 


“Land”
means the parcels of real estate described on Exhibit A attached to the
Mortgages and made a part hereof.


 


10

















 


“Leases”
means all leases, subleases, lettings, occupancy agreements, tenancies and
licenses by Borrower as landlord of the Mortgaged Property or any part thereof
now or hereafter entered into, and all amendments, extensions, renewals and
guarantees thereof, and all security therefor.


 


“Leasing
Commissions” means leasing commissions incurred by Borrower in connection
with leasing any Mortgaged Property or any portion thereof (including renewals
of existing Leases).


 


“Legal
Requirements” means all governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental Authorities
(including, without limitation, any of the foregoing relating to zoning,
parking or land use, any and all Environmental Laws and the Americans with
Disabilities Act) affecting Borrower or any Mortgaged Property or any part
thereof or the construction, use, alteration or operation thereof, or any part
thereof (whether now or hereafter enacted and in force), and all permits,
licenses and authorizations and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, at any time in force affecting the Mortgaged Property or any part
thereof or any utility services or septic systems or other infrastructure
serving any portion of the Mortgaged Property (including, without limitation,
any which may (i) require repairs, modifications or alterations in or to the
Mortgaged Property or any part thereof or any utility services or septic
systems or other infrastructure serving any portion of the Mortgaged Property,
or (ii) in any way limit the use and enjoyment thereof).


 


“Lender”
has the meaning provided in the first paragraph of this Agreement.


 


“Letter
of Credit Rights” means all of Borrower’s right, title and interest, whether
now owned or hereafter acquired, in, to and under all “letter of credit rights”
as defined in the UCC.


 


“Lien”
means any mortgage, deed of trust, lien (statutory or other), pledge,
hypothecation, assignment, security interest, or any other encumbrance or
charge on or affecting Borrower or any Mortgaged Property or any portion
thereof, or any interest therein (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and mechanic’s,
materialmen’s and other similar liens and encumbrances).


 


“Loan”
means the loan made by Lender to Borrower pursuant to the terms of this
Agreement.


 


“Loan
Amount” means an amount equal to $34,254,000.00.


 


“Loan
Documents” means this Agreement, the Note, the Contract Assignment, the
Management Agreement, the Manager’s Subordination, the Mortgages, the
Assignments of Rents and Leases, the Environmental Indemnity Agreement, the
Guaranty of Non-Recourse Obligations, the Side Agreement and all other
agreements, instruments, certificates and documents delivered by or on behalf
of Borrower or an Affiliate of Borrower to evidence or secure the Loan as same
may be amended or modified from time to time.


 


11

















 


“Local
Collection Account” and “Local Collection Account Bank” have the
meanings set forth in Section 2.12(a).


 


“Local
Collection Account Agreement” means with respect to the Local Collection
Account, the lockbox agreement, dated as of the applicable date and executed by
Borrower, Lender and the Local Collection Account Bank.


 


“Loss
Proceeds” means Condemnation Proceeds and/or Insurance Proceeds.


 


“Loss
Proceeds Account” has the meaning set forth in Section 2.12(f) hereof.


 


“Losses”
has the meaning set forth in Section 5.1(j).


 


“Management
Agreement” means with respect to any Mortgaged Property, the property
management agreement entered into between Borrower and the Manager, in such
form as may be reasonably approved by Lender, as such agreement(s) may be
amended, modified or supplemented in accordance with the terms and conditions
hereof from time to time, and any management agreement which may hereafter be
entered into with respect to any Mortgaged Property in accordance with the
terms and conditions hereof, as the same may be amended, modified or
supplemented in accordance with the terms and conditions hereof from time to
time.


 


“Manager”
means ARC Management Services, Inc., a Delaware corporation, the current
manager of the Mortgaged Property under the current Management Agreement, or
such other Person as may hereafter be charged with management of any Mortgaged
Property pursuant to a Management Agreement entered into in accordance with the
terms and conditions hereof.


 


“Manager’s
Subordination” means, with respect to each Mortgaged Property, initially
each Manager’s Consent and Subordination of Management Agreement, each executed
by the Manager, Borrower and Lender, dated as of the Closing Date, and in the
event a successor or assignee Manager is engaged at any Mortgaged Property, a
subordination agreement executed by Manager, Borrower and Lender in form and
substance satisfactory to Lender, whereby, among other things, the Management
Agreement is subordinated to the Indebtedness and to the Lien of the Mortgages
so long as the Loan remains outstanding.


 


“Master
Homesite Lease Agreement” means, with respect to each legal entity
comprising the Borrower, the related Master Homesite Lease Agreement, dated as
of February __, 2004, by and between ARC Housing, LLC (or with respect to any
Mortgaged Property located in Texas, ARC Housing TX LP, a Delaware limited
partnership) and such entity comprising the Borrower.


 


“Master
Homesite Lease Documentation” means, individually or collectively, as
applicable, each and every Master Homesite Lease Agreement.


 


“Master
Lease Deposits” means the security deposits under the Master Homesite Lease
Documentation.


 


“Master
Lease Deposit Account” has the meaning set forth in Section 2.12(a)(i).


 


12

















 


“Material
Adverse Effect” means a material adverse effect upon (i) the business
operations, properties, assets or condition (financial or otherwise) of
Borrower, (ii) the ability of Borrower to perform, or of Lender to enforce, any
of the Loan Documents or (iii) the aggregate value of the Mortgaged Property.


 


“Maturity
Date” means the earlier of (a) the Scheduled Maturity Date or (b) such
earlier date on which the entire Loan is required to be paid in full, by
acceleration or otherwise under this Agreement or any of the other Loan
Documents.


 


“Maximum
Rate” has the meaning set forth in Section 2.5(i) hereof.


 


“Member”
means ARC Real Estate Holdings, LLC, a Delaware limited liability company.


 


“Moody’s”
means Moody’s Investors Services, Inc. and its successors.


 


“Money”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under (i) all “money” as defined in the UCC and
(ii) all moneys, cash, or other items of legal tender generated from the use or
operation of the Mortgaged Property.


 


“Monthly
Debt Service Payment” has the meaning set forth in Section 2.5
hereof.


 


“Monthly
Debt Service Payment Amount” has the meaning set forth in Section 2.5
hereof.


 


“Mortgage”
means, with respect to the Mortgaged Property, a first priority Mortgage or
Deed of Trust (as applicable), Assignment of Leases and Rents, Security
Agreement and Fixture Filing, dated as of the Closing Date (and, if there are
more than one, each and every one of them), granted by the Borrower to or for
the benefit of Lender or Deed of Trust Trustee for the benefit of Lender,
respectively, with respect to the Mortgaged Property as security for the Loan,
as same may thereafter from time to time be supplemented, amended, modified or
extended by one or more agreements supplemental thereto.


 


“Mortgaged
Property” means, at any time, individually or collectively, as applicable,
the Land, the Improvements, the Personalty, the Leases and the Rents, and all
rights, titles, interests and estates appurtenant thereto, encumbered by, and
more particularly described in, each of the Mortgages.


 


“Multiemployer
Plan” means a multiemployer plan defined as such in Section 3(37) of ERISA
and which is covered by Title IV of ERISA (i) to which contributions have been,
or were required to have been made by Borrower or any ERISA Affiliate within
the past six years or (ii) with respect to which Borrower could reasonably be
expected to incur liability.


 


“Net
Proceeds” means either (x) the purchase price (at foreclosure or otherwise)
actually received by Lender from a third party purchaser with respect to any
Mortgaged Property, as a result of the exercise by Lender of its rights,
powers, privileges and other remedies after the occurrence of an Event of
Default or (y) in the event that Lender (or its nominee) is the


 


13

















 


purchaser at foreclosure of any Mortgaged
Property, the higher of (i) the amount of Lender’s credit bid or (ii) such
amount as shall be determined in accordance with applicable law, and in either
case minus all reasonable third party, out of pocket costs and expenses
(including, without limitation, all attorneys’ fees and disbursements and any
brokerage fees, if applicable) incurred by Lender (and its nominee, if
applicable) in connection with the exercise of such remedies; provided, however,
that such costs and expenses shall not be deducted to the extent such amounts
previously have been added to the Indebtedness in accordance with the terms of
the Loan Documents or applicable law.


 


“Note”
means one or more promissory notes made by Borrower to Lender pursuant to this
Agreement, as such note may be modified, amended, supplemented, restated or
extended, and any replacement notes therefor.


 


“O&M
Program” has the meaning set forth in Section 5.1(d)(iv) hereof.


 


“OFAC”
has the meaning set forth in Section 4.1(v) hereof.


 


“Officer’s
Certificate” means a certificate delivered to Lender by Borrower which is
signed by an authorized officer of Borrower.


 


“Operating
Budget” means, with respect to any Fiscal Year, the operating budget for
the Mortgaged Property reflecting Borrower’s projections of Gross Revenues and
Property Expenses for the Mortgaged Property for such Fiscal Year and on an
annual and monthly basis and submitted by Borrower to Lender in accordance with
the provisions of Section 5.1(r)(viii), which Operating Budget shall
include, as a component thereof, a Working Capital Budget.


 


“Operating
Expense Account” has the meaning provided in Section 2.13(c).


 


“Operating
Expenses” means, for any period of calculation, all expenditures incurred
and required to be expensed under GAAP during such period in connection with
the ownership, operation, maintenance, repair and/or leasing of the Mortgaged
Property, including without limitation (or duplication) Property Expenses.  Notwithstanding the foregoing, Operating
Expenses shall not include (a) Capital Improvement Costs, (b) any extraordinary
items (unless Lender and Borrower approve of the inclusion of such items as
Operating Expenses), (c) depreciation, amortization and other non-cash charges
or (d) any payments of principal or interest on the Indebtedness or otherwise
payable to the holder of the Indebtedness. 
Operating Expenses shall be calculated on the accrual basis of
accounting.


 


“Operating
Revenues” means, for any period, all regular ongoing income during such
period from the operation of the Mortgaged Property that, in accordance with
GAAP, is included in annual financial statements as revenue.  Notwithstanding the foregoing, Operating
Revenues shall not include (a) any Loss Proceeds (other than business
interruption proceeds or Condemnation Proceeds in connection with a temporary
Taking and, in either case, only to the extent allocable to such period or
other applicable reporting period), (b) any proceeds resulting from the sale,
exchange, transfer, financing or refinancing of the Mortgaged Property, (c) any
Rent attributable to a Lease more than one month prior to the date on which the
actual payment of Rent is required to be made thereunder, (d) any interest
income from any source, or (e) any


 


14

















 


other extraordinary items as reasonably
determined by Lender.  Operating
Revenues shall be calculated on the accrual basis of accounting.


 


“Organizational
Agreements” means, individually or collectively, (i) the certificate of
formation and operating agreement, (ii) the certificate of limited partnership
and partnership agreement, (iii) the certificate of incorporation and by-laws
or (iv) the trust agreement or other organizational documents, as applicable of
any Person, each as amended or restated from time to time.


 


“Origination
Fee” means 0.5% of the Loan Amount, payable to Lender on the Closing Date.


 


“Other
Borrowings” means, with respect to Borrower, without duplication (but not
including the Indebtedness or any interest rate protection agreement entered
into pursuant hereto) (i) all indebtedness of Borrower for borrowed money or
for the deferred purchase price of property or services, (ii) all indebtedness
of Borrower evidenced by a note, bond, debenture or similar instrument, (iii)
the face amount of all letters of credit issued for the account of Borrower
and, without duplication, all unreimbursed amounts drawn thereunder, and
obligations evidenced by bankers’ acceptances, (iv) all indebtedness of
Borrower secured by a Lien on any property owned by Borrower (whether or not
such indebtedness has been assumed), (v) all Contingent Obligations of
Borrower, (vi) liabilities and obligations for the payment of money relating to
a capitalized lease obligation or sale/leaseback obligation, (vii) liabilities
and obligations representing the balance deferred and unpaid of the purchase
price of any property or services, except those incurred in the ordinary course
of Borrower’s business that would constitute ordinarily a trade payable to
trade creditors, and (viii) all payment obligations of Borrower, if any, under
any interest rate protection agreement (including, without limitation, any
interest rate swaps, caps, floors, collars or similar agreements) and similar
agreements.


 


“Partial
Defeasance” has the meaning set forth in Section 2.7.


 


“Partial
Defeasance Amount” has the meaning set forth in Section 2.17


 


“Partial
Defeasance Collateral” shall mean U.S. Obligations, which provide payments
(i) on or prior to, but as close as possible to, all Payment Dates and other
scheduled payment dates, if any, under the Defeased Note after the Defeasance
Date and up to and including the Scheduled Maturity Date, and (ii) in amounts
equal to or greater than the respective Scheduled Defeasance Payments related
to such Payment Dates.


 


“Partial
Release” has the meaning set forth in Section 2.17.


 


“Partial
Release Property” has the meaning set forth in Section 2.17.


 


“Payment
Date” has the meaning provided in Section 2.5(a).


 


“Payment
Intangibles” means all of Borrower’s right, title and interest, whether now
owned or hereafter acquired, in, to and under all “payment intangibles” as
defined in the UCC.


 


15

















 


“PBGC”
means the Pension Benefit Guaranty Corporation established under ERISA, or any
successor thereto.


 


“Permits”
means all licenses, permits, variances and certificates required by Legal
Requirements to be obtained by Borrower and used in connection with the
ownership, operation, use or occupancy of the Mortgaged Property (including,
without limitation, certificates of occupancy, building permits, business
licenses, state health department licenses, licenses to conduct business and
all such other permits, licenses and rights, obtained from any Governmental
Authority or private Person concerning ownership, operation, use or occupancy
of the Mortgaged Property).


 


“Permitted
Encumbrances” means, with respect to the Mortgaged Property, collectively,
(i) the Lien created by the related Mortgages, or any other Loan Documents of
record encumbering each Mortgaged Property, (ii) all Liens and other matters
disclosed on the Title Insurance Policy concerning each Mortgaged Property,
(iii) Liens, if any, for Impositions imposed by any Governmental Authority not
yet delinquent or being contested in good faith and by appropriate proceedings
in accordance with Section 5.1(b)(ii) hereof and the related Mortgages,
(iv) mechanic’s or materialmen’s Liens, if any, being contested in good faith
and by appropriate proceedings in accordance with Section 5.1(b)(ii)
hereof and the related Mortgages, provided that no foreclosure has been commenced
by the lien claimant, (v) rights of existing and future tenants and residents
as tenants only pursuant to Leases, (vi) Liens for public utilities and (vii)
claims against Homesites incurred by tenants or other occupants of the
Mortgaged Property which claims, to the extent they affect the Mortgaged
Property, are contested in good faith and by appropriate proceedings in
accordance with Section 5.1(b)(ii) hereof, which Liens and encumbrances
referred to in clauses (i)-(vii) above do not materially and adversely affect
(1) the ability of Borrower to pay in full the Principal Indebtedness and
interest thereon in a timely manner or (2) the use of any Mortgaged Property
for the use currently being made thereof, the operation of any Mortgaged
Property as currently being operated.


 


“Permitted
Investments” means any one or more of the following obligations or
securities acquired at a purchase price of not greater than par:


 


(i)                                     obligations of, or obligations fully
guaranteed as to payment of principal and interest by, the United States or any
agency or instrumentality thereof provided such obligations are backed by the
full faith and credit of the United States of America;


 


(ii)                                  obligations of the following United States of
America government sponsored agencies, provided such obligations are backed by
the full faith and credit of the United States of America: Federal Home Loan
Mortgage Corp. (debt obligations), the Farm Credit System (consolidated
systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt
obligations), the Federal National Mortgage Association (debt obligations), the
Financing Corp. (debt obligations), and the Resolution Funding Corp. (debt
obligations);


 


(iii)                               federal funds, unsecured certificates of deposit, time deposits,
bankers’ acceptances and repurchase agreements with maturities of not more than
365 days of any


 


16

















 


bank,
the short-term obligations of which are rated in the highest short-term rating
category by the Rating Agencies;


 


(iv)                              certificates of deposit, time deposits, demand deposits or banker’s
acceptances issued by any depository institution or trust company incorporated
under the laws of the United States or of any state thereof and subject to
supervision and examination by federal and/or state banking authorities, the
short-term obligations of which are rated in the highest short-term rating
category by the Rating Agencies, which investments are fully insured by the
Federal Deposit Insurance Corp.;


 


(v)                                 debt obligations with maturities of not more
than 365 days and rated by the Rating Agencies in its highest long-term
unsecured rating category;


 


(vi)                              commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a
specified date not more than one year after the date of issuance thereof) with
maturities of not more than 270 days and that is rated by the Rating Agencies
in their highest short-term unsecured debt rating; and


 


(vii)                           any other demand, money market or time deposit, demand obligation or
any other obligation, security or investment, which Lender shall have approved
in writing and for which Borrower shall have delivered a Rating Confirmation;


 


provided, however, that (A) the investments
described in clauses (i) through (vii) above must have a predetermined fixed
dollar of principal due at maturity that cannot vary or change, (B) if such
investments have a variable rate of interest, such interest rate must be tied
to a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, (C) such investments must not be subject to
liquidation prior to their maturity or have an “r” highlighter affixed to its
rating by S&P, and (D) such investments must not be subject to liquidation
prior to their maturity; and provided, further, that, in the
judgment of Lender, such instrument continues to qualify as a “cash flow
investment” pursuant to Code Section 860G(a)(6) earning a passive return in the
nature of interest and that no instrument or security shall be a Permitted
Investment if such instrument or security evidences (x) a right to receive only
interest payments or (y) the right to receive principal and interest payments
derived from an underlying investment at a yield to maturity in excess of 120%
of the yield to maturity at par of such underlying investment.


 


“Permitted
Transfer” means any conveyance, assignment, sale or other disposition (and
not a mortgaging, encumbrance, pledging, hypothecation, or granting of a security
interest) (directly or indirectly) of not more than 49% of the voting and
beneficial ownership interests in any legal entity comprising Borrower or the
Member following which Affordable Residential Communities LP (i) owns (directly
or indirectly) 51% or more of such voting and beneficial ownership interests in
each legal entity comprising Borrower and (ii) controls the operations and
management of Borrower; provided, that any such Transfer referred to
above which takes the form of a Transfer of the equity ownership interests in
any legal entity comprising Borrower or the Member to a transferee which
(collectively amongst itself and its Affiliates that own such equity ownership
interests) acquires (directly or indirectly) a greater than 49% ownership interest


 


17

















 


in such legal entity comprising Borrower or
the Member, or which acquires control over the operations and management of
such legal entity comprising Borrower or the Member, shall not be permitted unless,
in addition to satisfaction of the conditions set forth in clauses (i) and (ii)
of this definition above, Borrower delivers to Lender (1) a substantive
non-consolidation opinion in form and substance reasonably acceptable to Lender
and the Rating Agencies, if required by Lender or the Rating Agencies and (2) a
Rating Confirmation.


 


“Person”
means any individual, corporation, limited liability company, partnership,
joint venture, estate, trust, unincorporated association, any federal, state,
county or municipal government or any bureau, department or agency thereof and
any fiduciary acting in such capacity on behalf of any of the foregoing.


 


“Personalty”
means all right, title and interest of Borrower in and to all Equipment,
Inventory, Accounts, General Intangibles, Instruments, Investment Property,
Receivables, Pledged Accounts, Deposit Accounts, Contracts and Intellectual
Property and all other personal property as defined in the relevant UCC, now
owned or hereafter acquired by Borrower and now or hereafter affixed to, placed
upon, used in connection with, arising from or otherwise related to the
Mortgaged Property or which may be used in or relating to the planning,
development, financing or operation of such Mortgaged Property, including,
without limitation, furniture, furnishings, equipment, machinery, money,
insurance proceeds, accounts, contract rights, trademarks, goodwill, chattel
paper, documents, trade names, licenses and/or franchise agreements, rights of
Borrower under leases of fixtures or other personal property or equipment,
inventory, all refundable, returnable or reimbursable fees, deposits or other
funds or evidences of credit or indebtedness deposited by or on behalf of
Borrower with any governmental authorities, boards, corporations, providers of
utility services, public or private, including specifically, but without
limitation, all refundable, returnable or reimbursable tap fees, utility
deposits, commitment fees and development costs.


 


“Plan”
means an employee benefit or other plan, other than a Multiemployer Plan, that
is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the
Code, and (i) was established or maintained by Borrower or any ERISA Affiliate
during the five year period ended prior to the date of this Agreement or to
which Borrower or any ERISA Affiliate makes, is obligated to make or has,
within the five year period ended prior to the date of this Agreement, been
required to make contributions or (ii) with respect to which Borrower could
reasonably be expected to incur liability.


 


“Pledged
Accounts” means the Local Collection Account(s), the Collection Account,
the Reserve Accounts, the Loss Proceeds Account, the Security Deposit Account,
the Master Lease Deposit Account, any additional accounts now or hereafter
maintained by or on behalf of Borrower hereunder and any sub-accounts of any of
the foregoing and any successor accounts to any of the foregoing.


 


“Policies”
has the meaning provided in Section 5.1(x)(iii).


 


“Pre-existing
Condition” has the meaning set forth in Section 5.1(x)(iii)(B)
hereof.


 


18

















 


“Principal
Indebtedness” means the principal amount of the Loan outstanding as
adjusted by each increase (including advances made by Lender to protect the
Collateral), or decrease in such principal amount of the Loan outstanding,
whether as a result of prepayment or otherwise, from time to time.


 


“Prepaid
Rent Account” has the meaning provided in 2.13(d).


 


“Prepayment
Consideration” has the meaning set forth in Section 2.6(c) hereof.


 


“Proceeds”
shall have the meaning given in the UCC and, in any event, shall include,
without limitation, all of Borrower’s right, title and interest in and to
proceeds, product, offspring, rents, profits or receipts, in whatever form,
arising from the Collateral.


 


“Prohibited
Person” has the meaning set forth in Section 4.1(v) hereof.


 


“Property
Expenses” means, with respect to the Mortgaged Property, the following
costs and expenses but only, in the case of costs and expenses in respect of
goods and services, to the extent that they (x) are paid to Persons who are
generally in the business of providing such goods and services, (y) are
customary for the types of goods or services provided in the geographical area
in which such goods or services are provided and (z) do not constitute Capital
Improvement Costs:


 


(i)                                     Impositions;


 


(ii)                                  insurance premiums for policies of insurance
required to be maintained by Borrower pursuant to this Agreement or the other
Loan Documents or otherwise maintained by Borrower or an Affiliate of Borrower
on behalf of Borrower in the ordinary course of business with respect to the
Mortgaged Property;


 


(iii)                               the cost of all electricity, oil, gas, water, steam, heat, ventilation,
air conditioning and any other energy, utility or similar item and overtime
services with respect to the Mortgaged Property;


 


(iv)                              payments required under service contracts for any services or items
used at the Mortgaged Property or otherwise used in the operation of the
Mortgaged Property (including, without limitation, service contracts for
heating, ventilation and air conditioning systems, elevators, landscape
maintenance, pest extermination, security, furniture, trash removal, answering
service and credit checks);


 


(v)                                 wages, benefits, payroll taxes, uniforms, the
cost of cleaning supplies and all related expenses for on-site personnel
directly involved in the day-to-day operation of the Mortgaged Property
(including, without limitation, full time, part time, or seasonal employees,
allocated between a number of properties and general repair, maintenance and
security employees), whether hired by Borrower, Manager or any other Person;


 


(vi)                              costs required in connection with the enforcement of any Lease
(including, without limitation, reasonable attorneys’ fees, charges for lock
changes and storage and moving expenses for furniture, fixtures and equipment);


 


19

















 


(vii)                           advertising and rent-up expenses (including, without limitation, leasing
services, tenant rent concessions, promotions for existing and prospective
tenants, banners and signs);


 


(viii)                        out-of-pocket cleaning, maintenance and repair expenses;


 


(ix)                                any expense the total cost of which is passed through to tenants
pursuant to executed Leases;


 


(x)                                   legal, accounting, auditing and other
professional fees and expenses incurred in connection with the ownership,
leasing and operation of the Mortgaged Property (including, without limitation,
collection costs and expenses);


 


(xi)                                permits, licenses and registration fees and costs;


 


(xii)                             any expense necessary in order to prevent a breach under a Lease;


 


(xiii)                          any expense necessary in order to prevent or cure a violation of any
Legal Requirement (including Environmental Law), regulation, code or ordinance;


 


(xiv)                         costs and expenses of any appraisals, valuations, surveys, inspections,
environmental assessments or market studies, zoning reports;


 


(xv)                            costs and expenses of security and security systems provided to and/or
installed and maintained with respect to the Mortgaged Property;


 


(xvi)                         costs of title, UCC, litigation and other searches and costs of
maintaining the Lien of the Mortgages thereon and the security interest in any
related Collateral;


 


(xvii)                      fees and expenses of property managers contracted with by Borrower to
perform management, administrative, payroll or other services in connection
with the operation of the Mortgaged Property (including, without limitation,
the fees and expenses owed to Manager under any Management Agreement which the
Lender has approved in accordance with this Agreement);


 


(xviii)                   any other costs and expenses contemplated by the Operating Budget and
customarily incurred in connection with operating properties similar in type
and character to the Mortgaged Property; and


 


(xix)                           any other category of property expense that is customary for a property
of the type and size as the Mortgaged Property and is reasonably approved by
Lender.


 


“Quarterly
Statement” has the meaning provided in Section 2.12(e).


 


“Rating
Agencies” means at least two of Fitch, Moody’s and S&P (or, if a
Secondary Market Transaction has occurred in which Securities have been issued,
each of the foregoing that rated such Securities).


 


20

















 


“Rating
Criteria” with respect to any Person, means that (i) the short-term
unsecured debt obligations of such Person are rated at least “A-1” by S&P,
“P-1” by Moody’s and “F-1” by Fitch, if deposits are held by such Person for a
period of less than one month, or (ii) the long-term unsecured debt obligations
of such Person are rated at least “AA-” by S&P, “Aa3” by Moody’s and “AA-”
by Fitch, if deposits are held by such Person for a period of one month or
more.


 


“Rating
Confirmation” with respect to any transaction, matter or action in
question, means: (i) if all or any portion of the Loan, by itself or together
with other loans, has been the subject of a Secondary Market Transaction, the
written confirmation of the Rating Agencies that such transaction, matter or action
shall not, in and of itself, result in the downgrading, withdrawal or
qualification of the then-current ratings assigned to any of the Securities
issued in connection with a Secondary Market Transaction; and (ii) if any
portion of the Loan has not been the subject of a Secondary Market Transaction,
Lender shall have determined in its reasonable discretion (taking into
consideration such factors as Lender may determine, including the attributes of
the loan pool in which any portion of the Loan reasonably be expected to be
securitized) that no rating for any Securities that would be issued in
connection with a Secondary Market Transaction involving any of such portion of
the Loan would be downgraded, qualified, or withheld by reason of such
transaction, matter or action.


 


“Real
Estate Taxes Escrow Account” has the meaning provided in Section 2.13(b).


 


“Receivables”
means all of Borrower’s right, title and interest, whether now owned or
hereafter acquired, in, to and under (i) 
any Accounts, Chattel Paper, Instruments, Payment Intangibles, Letter of
Credit Rights, Documents, insurance policies, drafts, bills of exchange, trade
acceptances, notes or other indebtedness owing to Borrower from whatever source
arising, (ii) to the extent not otherwise included above, (a) all income,
Rents, issues, profits, revenues, deposits and other benefits from the
Mortgaged Property and (b) all receivables and other obligations now existing
or hereafter arising, or created out of the sale, lease, sublease, license,
concession or other grant of the right of the use and occupancy of property or
rendering of services by Borrower or any operator or manager of the Mortgaged
Property or other commercial space located at the Mortgaged Property or
acquired from others (including, without limiting the generality of the
foregoing, from rental of space, halls, stores, and offices, and deposits
securing reservations of such space, exhibit or sales space of every kind,
license, lease, sublease and concession fees and rentals, wholesale and retail
sales of merchandise, service charges, vending machine sales and proceeds, if
any, from business interruption or other loss of income insurance,  (iii) all of the books and records (whether
in tangible, electronic or other form) now or hereafter maintained by or on
behalf of Borrower in connection with the operation of the Mortgaged Property
or in connection with any of the foregoing and (iv) all Supporting Obligations
and all liens and security interests securing any of the foregoing and all other
rights, privileges and remedies relating to any of the foregoing.


 


“Release”
means any active or passive release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment (including, without limitation, the movement
of Hazardous Substances through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata).


 


21

















 


“Remedial
Work” has the meaning set forth in Section 5.1(d)(i).


 


“Rents”
means all income, rents (including base rent), issues, profits, revenues
(including all oil and gas or other mineral royalties and bonuses), deposits
(other than utility and security deposits) and other benefits from the
Mortgaged Property.


 


“Replacement
Reserve Account” has the meaning set forth in Section 2.13(a).


 


“Replacement
Reserve Deposit Amount” means an amount equal to one-twelfth (1/12th)
of the product of $50.00 and the number of Homesites at the Mortgaged Property;
provided, that, notwithstanding the foregoing, in the event the Lender
determines in its reasonable discretion that an increase in such amount is
necessary to maintain proper operation of the Mortgaged Properties, then upon
not less than thirty (30) days prior written notice to the Borrower, the Lender
may increase the aforementioned amount based upon its reassessment of the
amount necessary for Capital Improvement Costs from time to time.


 


“Replacement
Reserve Threshold Amount” means the product of $50.00 (or such higher
amount as the Lender shall reasonably determine pursuant to the proviso to the
definition of Replacement Reserve Deposit Amount) and the number of Homesites
at the Mortgaged Property.


 


“Reserve
Account(s)” means the Deferred Maintenance Escrow Account, the Replacement
Reserve Account, the Real Estate Taxes Escrow Account, the Insurance Escrow
Account, the Operating Expense Account, Working Capital Reserve Account, the
Debt Service Reserve Account and the Prepaid Rent Account, collectively, and
any successor accounts to any of the foregoing.


 


“Restoration”
has the meaning set forth in Section 5.1(x)(iii)(B).


 


“Scheduled
Defeasance Payments” shall mean scheduled payments of interest and
principal under the Note in the case of a Total Defeasance and under the
Defeased Note in the case of a Partial Defeasance for all Payment Dates
occurring after the Defeasance Date and up to and including the Scheduled
Maturity Date (including, in the case of a Total Defeasance, the outstanding
principal balance of the Loan as of the Scheduled Maturity Date and, in the
case of a Partial Defeasance, the outstanding principal balance of the Defeased
Note as of the Scheduled Maturity Date), and all payments required after the
Defeasance Date, if any, under the Loan Documents for servicing fees, and other
similar charges.


 


“Scheduled
Maturity Date” mean March 1, 2014.


 


“S&P”
shall mean Standard & Poor’s Rating Services, a division of The McGraw-Hill
Companies, Inc and its successors.


 


“Secondary
Market Transaction” has the meaning set forth in Section 5.1(w).


 


“Security
Agreement” shall mean a security agreement in form and substance that would
be satisfactory to a prudent lender pursuant to which Borrower grants Lender a
perfected,


 


22

















 


first priority security interest in the
Defeasance Collateral Account and the Defeasance Collateral.


 


“Securities”
means mortgage pass-through certificates or other securities issued in a
Secondary Market Transaction and evidencing a beneficial interest in or secured
in whole or in part by the Loan in a rated or unrated public offering or
private placement.


 


“Security
Deposit Account” has the meaning set forth in Section 2.12(a)(i).


 


“Side
Agreement” means that certain Side Agreement dated as of the date hereof,
by and among Guarantor, Borrower and Lender.


 


“Single
Member” has the meaning set forth in Section 8.1(ee).


 


“Supporting
Obligations” means all of Borrower’s right, title and interest, whether now
owned or hereafter acquired, in, to and under (i) all “supporting obligations”
as defined in the UCC and (ii) any other guarantee, letter of credit, secondary
obligation, right or privilege that supports or pertains to any of the
Mortgaged Property.


 


“Survey”
means a certified ALTA/ACSM survey of each Mortgaged Property prepared by a
registered Independent surveyor, containing the form of survey or certification
provided to Borrower by Lender and in form and content reasonably satisfactory
to Lender and the company issuing the Title Insurance Policy for each Mortgaged
Property.


 


“Taking”
means a taking or voluntary conveyance during the term hereof of all or part of
any Mortgaged Property, or any interest therein or right accruing thereto or
use thereof, as the result of, or in settlement of, any condemnation or other
eminent domain proceeding by any Governmental Authority affecting the Mortgaged
Property or any portion thereof whether or not the same shall have actually
been commenced.


 


“Tax
Liabilities” has the meaning set forth in Section 2.10(a) hereof.


 


“Title
Insurance Policy” means a mortgagee’s title insurance policy or policies
(i) issued by one or more title companies reasonably satisfactory to Lender
which policy or policies shall (unless Lender otherwise requires or consents)
be in form ALTA 1992, where available (with waiver of arbitration provisions),
naming Lender as the insured party, (ii) insuring the Mortgages as being a
first and prior lien upon the Mortgaged Property, (iii) showing no encumbrances
against any Mortgaged Property (whether junior or superior to the Mortgages)
which are not reasonably acceptable to Lender other than Permitted
Encumbrances, (iv) in an amount reasonably satisfactory to Lender (it being
understood and agreed that because multiple Mortgaged Properties secure the
Loan, a reasonable requirement shall be deemed to include requiring title
insurance for a Mortgaged Property in the amount of the allocated loan amount
(as reasonably determined by Lender) for such Mortgaged Property if a tie-in
endorsement is available in the State where such Mortgaged Property is located
or 125% of the appraised value of a Mortgaged Property if a tie-in endorsement
is not available in the State where such Mortgaged Property is located or such
Mortgaged Property cannot be tied together with other Mortgaged Properties for
any reason), and (v) otherwise in form and content reasonably acceptable to
Lender.  Such Title Insurance Policy
shall include the following endorsements or


 


23

















 


affirmative coverages in form and substance
reasonably acceptable to Lender, to the extent available in the jurisdiction in
which the Land is located: variable rate endorsement; survey endorsement;
comprehensive endorsement; zoning (ALTA 3.1 with parking added) endorsement;
first loss, last dollar and tie-in endorsement; access coverage; separate tax
parcel coverage; contiguity (if applicable) coverage; and such other
endorsements as Lender shall reasonably require with respect to a particular Mortgaged
Property in order to provide insurance against specific risks identified by
Lender in connection with the Mortgaged Property.


 


“Total
Defeasance” shall have the meaning set forth in Section 2.3.


 


“Total
Defeasance Collateral” shall mean U.S. Obligations, which provide payments
(i) on or prior to, but as close as possible to, all Payment Dates and other
scheduled payment dates, if any, under the Note after the Defeasance Date and
up to and including the Scheduled Maturity Date, and (ii) in amounts equal to
or greater than the respective Scheduled Defeasance Payments related to such
Payment Dates.


 


“Transaction”
means the transactions contemplated by the Loan Documents.


 


“Transaction
Costs” means all costs and expenses paid or payable by Borrower relating to
the Transaction (including, without limitation, appraisal fees, legal fees and
accounting fees and the costs and expenses described in Section 9.23).


 


“Transfer”
means the conveyance, assignment, sale, mortgaging, encumbrance (other than a
Permitted Encumbrance), pledging, hypothecation, granting of a security
interest in, granting of options with respect to, or other disposition of
(directly or indirectly, voluntarily or involuntarily, by operation of law or
otherwise, and whether or not for consideration or of record) all or any
portion of any direct or indirect (irrespective of the number of tiers of
ownership) legal or beneficial interest (a) in all or any portion of the
Mortgaged Property; or (b) any stock, partnership interests, membership interests
or other ownership interests in Borrower or the Member or the constituent
entities directly or indirectly (irrespective of the number of tiers of
ownership) owning any such stock, partnership interests, membership interests
or other ownership interests.  A
Transfer shall also include, without limitation to the foregoing, the
following: an installment sales agreement wherein Borrower agrees to sell the
Mortgaged Property or any part thereof or any interest therein for a price to
be paid in installments; an agreement by Borrower leasing all or a substantial
part of the Mortgaged Property to one or more Persons pursuant to a single or
related transactions, or a sale, assignment or other transfer of, or the grant
of a security interest in, Borrower’s right, title and interest in and to any
Leases or any Rent; execution or consent by Borrower of any instrument
subjecting the Mortgaged Property to a condominium regime or transferring
ownership to a cooperative corporation; and any change of control of Borrower or
the Member.


 


“Treasury
Rate” means, on the date on which such rate is calculated, the yield on the
ten year “on the run” U.S. Treasury issue (primary issue) with such yield being
based on the bid price for such issue as reasonably determined by Lender.


 


“UCC”
means with respect to any Collateral, the Uniform Commercial Code as in effect
from time to time in the State of New York; provided, that if by reason
of mandatory


 


24

















 


provisions of law, the perfection or the
effect of perfection or non-perfection or priority of the security interest in
any item or portion of the Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than the State of New York, “UCC”
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection or priority. 
Wherever this agreement refers to terms as defined in the UCC, if such
term is defined in more than one Article of the UCC, the definition in Article
9 of the UCC shall control.


 


“UCC
Searches” has the meaning set forth in Section 3.1(v) hereof.


 


“Undefeased
Note” has the meaning set forth in Section 2.7.


 


“Underwritten
Net Cash Flow” means, as of any date of calculation with respect to the
Mortgaged Property, (i) the Operating Revenues calculated based upon the base
rent portion of the Rents during the most recent three month period for which
such information was furnished to Lender pursuant to Section 5.1(r)(v)
hereof, annualized, plus (ii) any utility and other income during the most
recent twelve month period for which such information was furnished to Lender
pursuant to Section 5.1(r)(v) hereof, minus (iii) the Operating Expenses
with respect to the Mortgaged Property during the most recent twelve month
period for which such information was furnished to Lender pursuant to Section
5.1(r)(v) hereof, each as determined by Lender and after Lender makes
adjustments, if necessary, for


 


(1)                                  expenses for management fees equal to the
greater of actual management fees or 5.00% of Operating Revenues for such
period,


 


(2)                                  a minimum vacancy allowance equal to 5.00%,


 


(3)                                  an annual minimum capital expenditure reserve
equal to the product of $50.00 multiplied by the total number of Homesites at
the Mortgaged Property,


 


(4)                                  exclusion of rental income and expenses from
manufactured homes owned by Borrower,


 


(5)                                  exclusion of any other revenue items
reasonably deemed nonrecurring by Lender, and


 


(6)                                  inclusion of increases in future operating
costs as determined by Lender, in its sole discretion, so that, assuming
current occupancy, the annualized underwritten Operating Expenses fully reflect
the operating costs expected to be incurred over the next twelve month period.


 


“U.S.
Obligations” shall mean securities that are (i) direct obligations of the
United States of America for the full and timely payment of which its full
faith and credit is pledged or (ii) obligations of an entity controlled or
supervised by and acting as an agency or instrumentality and guaranteed as a
full faith and credit obligation which shall be fully and timely paid by the
United States of America, which in either case are not callable or redeemable
at the option of the issuer thereof (including a depository receipt issued by a
bank (as defined in Section 3(a)(2) of the United States Securities Act)) as
custodian with respect to any such U.S.


 


25

















 


Obligations or a specific payment of
principal of or interest on any such U.S. Obligations held by such custodian
for the account of the holder of such depository receipt, provided that (except
as required by law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the securities or the specific payment
of principal of or interest on the securities evidenced by such depository
receipt.


 


“Use”
means, with respect to any Hazardous Substance, the generation, manufacture,
processing, distribution, handling, use, treatment, recycling or storage of
such Hazardous Substance or transportation of such Hazardous Substance in
connection with or affecting Borrower or the Mortgaged Property.


 


“Welfare
Plan” means an employee welfare benefit plan as defined in Section 3(1) of
ERISA established or maintained by Borrower or any ERISA Affiliate or with
respect to which Borrower or any ERISA Affiliate has an obligation to make
contributions and covers any current or former employee of Borrower or any
ERISA Affiliate.


 


“Working
Capital Budget” means, with respect to any Fiscal Year, the component of
the Operating Budget for such fiscal year submitted by Borrower to Lender in
accordance with the provisions of Section 5.1(r)(viii) which sets forth,
for each calendar month or other applicable time period, the amount of the
working capital reserve budgeted for such time period and changed thereto over
the course of such budget period (such working capital reserve amount for any
given time period is herein referred to as the “Working Capital Reserve
Amount”).


 


“Working
Capital Reserve Account” has the meaning set forth in Section 2.13(d)
hereof.


 


“Working
Capital Reserve Amount” has the meaning set forth in the definition of
Working Capital Budget.


 


ARTICLE II.

GENERAL TERMS


 


Section
2.1.                                   The Loan.


 


(a)                                  Subject to the terms and conditions of this
Agreement, Lender shall lend to Borrower on the Closing Date the Loan
Amount.  The proceeds of the Loan shall
be used solely for the purposes identified in Section 2.2 hereof.  Lender is hereby authorized to fund directly
from the proceeds of the Loan advanced at Closing (net of any deposits or
payments made by Borrower or its Affiliates prior to Closing) (i) the
Origination Fee, (ii) the deposits to the Deferred Maintenance Escrow Account,
the Real Estate Taxes Escrow Account, the Insurance Escrow Account and the
Replacement Reserve Account required to be funded from Loan proceeds pursuant
to Section 2.13, (iii) the out-of-pocket expenses incurred by Lender in
connection with the origination and funding of the Loan and (iv) the reasonable
fees and expenses of Lender’s and Borrower’s counsel.


 


(b)                                 The Loan shall constitute one general
obligation of Borrower to Lender and shall be secured by the security interest
in and Liens granted upon all of the Collateral, and


 


26

















 


by all other security interests and Liens at any
time or times hereafter granted by Borrower to Lender as security for the Loan.


 


Section
2.2.                                   Use of Proceeds. 
Proceeds of the Loan shall be used only for the following purposes:  (a) to, with respect to certain of the
Mortgaged Property, finance a portion of the acquisition cost of, and, with
respect to other of the Mortgaged Property, refinance existing mortgage debt at
such Mortgaged Property, (b) to pay to Lender the Origination Fee, (c) to make
the required deposits to the Deferred Maintenance Escrow Account, the Real
Estate Taxes Escrow Account, the Insurance Escrow Account and the Replacement
Reserve Account, (d) to pay Transaction Costs (including the reasonable
out-of-pocket expenses incurred by Lender in connection with the origination
and funding of the Loan) and (e) to pay reasonable fees, expenses and
disbursements of Lender’s and Borrower’s counsel.  Any proceeds of the Loan in excess of the amounts applied in
accordance with Sections 2.1(a) and 2.2(a)-(e) may be used by the
Borrower for its general purposes (including to make a distribution to the
Member).


 


Section
2.3.                                   Security for the Loan.  The
Note and Borrower’s obligations hereunder and under all other Loan Documents
shall be secured by (a) Liens upon the Mortgaged Property pursuant to the
Mortgages, (b) the Contract Assignment, (c) the Manager’s Subordination, (d)
the Assignment of Rents and Leases, and all other security interests and Liens
granted in this Agreement and in the other Loan Documents.


 


Section
2.4.                                   Borrower’s Note. 
Borrower’s obligation to pay the principal of and interest on the Loan
and all other amounts due under the Loan Documents shall be evidenced initially
by the Note, duly executed and delivered by Borrower on the Closing Date.  The Note shall be payable as to principal,
interest and all other amounts due under the Loan Documents, as specified in
this Agreement, with a final maturity on the Maturity Date.  Lender shall have the right to have the Note
subdivided, by exchange for promissory notes of lesser denominations in the
form of the initial Note, upon written request to Borrower and, in such event,
Borrower shall promptly execute additional or replacement Notes, at the
Lender’s sole expense with respect to Borrower’s reasonable out-of-pocket costs
in the event and to the extent Borrower incurs costs in connection therewith
other than in connection with the execution of such additional or replacement
Notes.  At no time shall the aggregate
original principal amount of the Note (or of such replacement Notes) exceed the
Loan Amount.


 


Section
2.5.                                   Principal and Interest.


 


(a)                                  Interest on the Loan shall accrue at the rate
set forth in Section 2.5(b) below commencing on the Closing Date.  Borrower shall make a payment to Lender of
interest only on the Closing Date for the period from the Closing Date through
the last day of the calendar month in which the Closing Date occurs.  Commencing on the first day of the second
calendar month following the calendar month in which the Closing Date occurs
(the “First Payment Date”) and on the first day of each calendar month
thereafter (each, with the First Payment Date, a “Payment Date”),
Borrower shall make equal monthly payments (each, a “Monthly Debt Service
Payment”) of principal and interest in the amount of $195,135.68 (the “Monthly
Debt Service Payment Amount”).  The
entire outstanding Principal Indebtedness of the Loan and the Note, together
with all accrued but unpaid interest thereon and all other amounts due under
the Loan Documents, shall be due and payable by Borrower to Lender on the


 


27

















 


Maturity Date.  Interest shall be computed on the basis of a
360 day year and the actual number of days elapsed during any month or other
accrual period.


 


(b)                                 The Principal Indebtedness shall bear
interest at a rate per annum equal to 5.53%, increasing, however, to the
Default Rate while an Event of Default has occurred and is continuing, as
provided in Section 2.5(c) below.


 


(c)                                  While an Event of Default has occurred and is
continuing, Borrower shall pay to Lender interest at the Default Rate on any
amount owing to Lender not paid when due until such amount is paid in full.


 


(d)                                 If any payment of principal, interest or
other sums shall not be made to Lender on the date the same is due hereunder or
under any of the other Loan Documents, then Borrower shall pay to Lender, in
addition to all sums otherwise due and payable, a late fee in an amount equal
to five percent (5.0%) of such principal, interest or other sums due hereunder
(other than the entire principal balance of the Loan due upon acceleration of
the Loan or upon Maturity) or under any other Loan Document (or, in the case of
a partial payment, the unpaid portion thereof), such late charge to be
immediately due and payable without demand by Lender.


 


(e)                                  Notwithstanding any provision to the contrary
contained in this Agreement or the other Loan Documents, Borrower shall not be
required to pay, and Lender shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law (“Excess
Interest”).  If any Excess Interest
is provided for or determined by a court of competent jurisdiction to have been
provided for in this Agreement or in any of the other Loan Documents, then in
such event: (1) the provisions of this paragraph shall govern and control; (2)
Borrower shall not be obligated to pay any Excess Interest; (3) any Excess
Interest that Lender may have received hereunder shall be, at Lender’s option,
(a) applied as a credit against either or both of the Principal Indebtedness of
the Loan or accrued and unpaid interest thereunder (not to exceed the maximum
amount permitted by law), (b) refunded to the payor thereof, or (c) any
combination of the foregoing; (4) the interest rate(s) provided for herein
shall be automatically reduced to the maximum lawful rate allowed from time to
time under applicable law (the “Maximum Rate”), and this Agreement and
the other Loan Documents shall be deemed to have been and shall be, reformed
and modified to reflect such reduction; and (5) Borrower shall not have any
action against Lender for any damages arising out of the payment or collection
of any Excess Interest.  Notwithstanding
the foregoing, if for any period of time interest on any Indebtedness is
calculated at the Maximum Rate rather than the applicable rate under this
Agreement, and thereafter such applicable rate becomes less than the Maximum
Rate, the rate of interest payable on such Indebtedness shall, to the extent
permitted by law, remain at the Maximum Rate until Lender shall have received or
accrued the amount of interest which Lender would have received or accrued
during such period on Indebtedness had the rate of interest not been limited to
the Maximum Rate during such period.  If
the Default Rate shall be finally determined to be unlawful, then the Maximum
Rate shall be applicable during any time when the Default Rate would have been
applicable hereunder, provided however that if the Maximum Rate is greater than
the applicable interest rate, then the foregoing provisions of this paragraph
shall apply.


 


28

















 


Section
2.6.                                   Prepayment.


 


(a)                                  Limitation on Prepayment; Prepayment
Consideration Due on Acceleration.  Borrower shall have no right
to prepay the Loan in whole or part at any time, except as expressly set forth
in this Section 2.6(a). Commencing on the First Open Prepayment Date,
Borrower may prepay the Loan in whole, but not in part, without payment of
Prepayment Consideration, provided that (i) Borrower shall provide to Lender
not less than thirty (30) days’ prior written notice of such prepayment, (ii)
together with such prepayment Borrower also shall pay all accrued and unpaid
interest and all other Obligations and (iii) if such prepayment occurs on any
day other than a Payment Date, then together therewith Borrower also shall pay
to Lender the amount of interest that would have accrued on the amount being
prepaid from and including the date of such prepayment to (but excluding) the
first day of the following calendar month. Borrower shall not be required to
pay any Prepayment Consideration with respect to an application of insurance
proceeds or condemnation awards by Lender pursuant to the Loan Agreement or
Mortgage in the absence of an Event of Default.


 


(b)                                 Prepayment Consideration Due.  If
the Maturity Date shall be accelerated to a date prior to the Scheduled
Maturity Date, or if any prepayment of all or any portion of the Principal
Indebtedness hereunder occurs, whether in connection with Lender’s acceleration
of the unpaid Principal Indebtedness of the Loan or in any other circumstances
whatsoever, or if the Mortgage is satisfied or released by foreclosure (whether
by power of sale or judicial proceeding), deed in lieu of foreclosure or by any
other means, then the Prepayment Consideration shall become immediately due and
owing and Borrower shall forthwith pay the Prepayment Consideration to Lender.
The foregoing shall not create any right of prepayment. Borrower shall have no
right whatsoever to prepay all or any portion of the Principal Indebtedness of
the Note, except as set forth in Section 2.6(a) above.


 


(c)                                  Definitions.  The following terms shall
have the meanings indicated:


 


The
“Prepayment Consideration” shall be the amount equal to the sum of (i)
an amount equal to the interest which would have accrued on the Principal
Indebtedness of the Note during the remaining days of the full calendar month
containing the date (the “Event Date”) which is the earlier of (x) the
date of prepayment of the Loan or (y) such earlier date upon which the entire
remaining Principal Indebtedness of the Loan shall become due and payable,
whether as a result of acceleration of the maturity of the Loan or otherwise,
plus (ii) the greater of (x) four percent of the Loan balance on the Event
Date, or (y) the sum of two percent of the Loan balance on the Event Date plus
an amount equal to the “Present Value Yield Differential”, calculated as
the excess, if any, of (A) the amount of the monthly interest which would
otherwise be payable on the principal balance of this Note from (1) the date
(the “Yield Determination Date”) which is either (xx) the Event Date (if
the required interest payment described in clause (i) above has not been made
through the end of the calendar month in which the Event Date occurs) or (yy)
if the required interest payment described in clause (i) above has been made
through the end of the calendar month in which the Event Date occurs, the first
day of the calendar month following the month containing the Event Date,
through and including (2) the Scheduled Maturity Date, over (B) the amount of
the monthly interest Lender would earn if an amount equal to the Principal
Indebtedness of the Loan as of the Event Date were invested for the period from
the Yield Determination Date through the Scheduled Maturity Date at the Yield
Rate (as hereinafter defined), such difference (the “Yield Differential”)
to be discounted to present value at the Yield Rate using the following
formula:


 


29

















 


	
  Present Value Yield

  Differential

  	
  =

  	
  Yield
  Differential

  
	
  (1
  + r)-n

  



 


where:


 


r=                                     Yield Rate, and


 


n=                                  the remaining Weighted Average Life to
Maturity

(as defined below)from the Yield Determination Date.


 


The
“Yield Rate” shall be the annualized yield on securities issued by the
United States Treasury having a maturity corresponding to the then remaining
Weighted Average Life to Maturity (as defined below) of this Note as determined
by Payee, as quoted in Federal Reserve Statistical Release [H. 15(519)]
under the heading “U.S. Government Securities - Treasury Constant Maturities”
for the Yield Rate Determination Date (as defined below), converted to a
monthly equivalent yield.  If yields for
such securities of such maturity are not shown in such publication, then the
Yield Rate shall be determined by Lender by linear interpolation between the
yields of securities of the next longer and next shorter maturities. If said
Federal Reserve Statistical Release or any other information necessary for
determination of the Yield Rate in accordance with the foregoing is no longer
published or is otherwise unavailable, then the Yield Rate shall be determined
by Payee based on comparable data.  The
term “Yield Rate Determination Date” shall mean the date which is five
(5) Business Days prior to the Yield Determination Date.  The term “Weighted Average Life to
Maturity” shall mean, at any date, the number of years (including
fractional years, expressed as a decimal (e.g., three years and three moths =
3.25 years)) obtained by dividing (x) the outstanding Principal Indebtedness of
the Loan on the Event Date into (y) the sum total of the Weighted Amortization
Products (as defined below) for each Scheduled Principal Payment (as defined
below).  The “Scheduled Principal
Payment(s)” shall mean each then remaining scheduled principal payment
(assuming no prepayment or Loan acceleration), including payment of the
outstanding principal balance of the Loan on the Scheduled Maturity Date, in
respect of the Loan.  The “Weighted
Amortization Product” for each Scheduled Principal Payment shall mean the
product of (A) the amount of such Scheduled Principal Payment multiplied by (B)
the number of years (including fractional years, expressed as a decimal) which
will elapse between the Yield Determination Date and the date on which such
Scheduled Principal Payment is to be made under this Loan Agreement.


 


Borrower
agrees that the Prepayment Consideration required hereunder is reasonable.  Borrower has given individual weight to the
consideration in this transaction for this waiver and agreement.


 


Section
2.7.                                   Defeasance.


 


(a)                                  Total Defeasance. 
Borrower shall have the right at any time after the First Open
Defeasance Date and prior to the First Open Prepayment Date to obtain a release
of the Lien of the Mortgage encumbering the Mortgaged Property (a “Total
Defeasance”) upon satisfaction of the following conditions:


 


(i)                                     Borrower shall provide Lender at least thirty
(30) days’ prior written notice (or such shorter period of time if permitted by
Lender in its sole discretion)


 


30

















 


specifying
a date (the “Defeasance Date”) on which Borrower shall have satisfied
the conditions in this Section 2.7(a) and on which it shall effect the
Total Defeasance;


 


(ii)                                  Borrower shall pay to Lender (A) all payments
of interest due on the Loan to and including the Defeasance Date and (B) all
other sums, then due under the Note, this Loan Agreement, the Mortgage and the
other Loan Documents;


 


(iii)                               Borrower shall irrevocably deposit the Total Defeasance Collateral into
the Defeasance Collateral Account and otherwise comply with the provisions of
this Section 2.7(a) and Sections 2.7(c) and (d) hereof;


 


(iv)                              Borrower shall execute and deliver to Lender a Security Agreement in
respect of the Defeasance Collateral Account and the Total Defeasance
Collateral;


 


(v)                                 Borrower shall deliver to Lender an opinion
of counsel for Borrower that is customary in commercial lending transactions
and subject only to normal qualifications, assumptions and exceptions opining,
among other things, that (w) Lender has a legal and valid perfected first
priority security interest in the Defeasance Collateral Account and the Total
Defeasance Collateral, (x) if a Securitization has occurred, the REMIC Trust
formed pursuant to such Securitization will not fail to maintain its status as
a “real estate mortgage investment conduit” within the meaning of Section 860D
of the Code as a result of the Total Defeasance pursuant to this Section
2.7(a), (y) a Total Defeasance pursuant to this Section 2.7 will not
result in a deemed exchange for purposes of the Code and will not adversely
affect the status of the Loan as indebtedness for federal income tax purposes,
(z) delivery of the Total Defeasance Collateral and the grant of a security
interest therein to Lender shall not constitute an avoidable preference under
Section 547 of the Bankruptcy Code or applicable state law;


 


(vi)                              If and to the extent required by the Rating Agencies, a
non-consolidation opinion with respect to the Successor Borrower;


 


(vii)                           Borrower shall deliver to Lender a confirmation in writing from the
applicable Rating Agencies to the effect that the release of the Mortgaged
Property from the Lien of the Mortgage as contemplated by this Section
2.7(a) and the substitution of the Total Defeasance Collateral will not
result in a downgrading, withdrawal or qualification of the respective ratings
in effect immediately prior to such defeasance for the Certificates issued in
connection with the Securitization which are then outstanding;


 


(viii)                        Borrower shall deliver an officer’s certificate certifying that the
requirements set forth in this Section 2.7 have been satisfied;


 


(ix)                                Borrower shall deliver a certificate of a nationally recognized public
accounting firm reasonably acceptable to Lender certifying that the Total
Defeasance Collateral will generate monthly amounts equal to or greater than
the Scheduled Defeasance Payments;


 


(x)                                   Borrower shall deliver such other
certificates, opinions, documents and instruments as Lender may reasonably
request; and


 


31

















 


(xi)                                Borrower shall pay all costs and expenses of Lender incurred in
connection with the defeasance, including Lender’s reasonable attorneys’ fees
and expenses and Rating Agency fees and expenses.


 


If
a Total Defeasance occurs and all of the requirements of this Section 2.7
have been satisfied, (i) Lender shall execute any and all documents required to
release the Mortgaged Property from the Lien of the Mortgage and the Assignment
of Leases and the Total Defeasance Collateral, pledged pursuant to the Security
Agreement, shall be the sole source of collateral securing the Loan.  In connection with any such release of the
Lien, Borrower shall submit to Lender, not less than thirty (30) days prior to
the Defeasance Date (or such shorter time as permitted by Lender in its sole
discretion), a release of Lien (and related Loan Documents) for execution by
Lender. Such release shall be in a form appropriate in the jurisdiction in
which the Mortgaged Property is located and contain standard provisions
protecting the rights of a releasing lender. In addition, Borrower shall
provide all other documentation Lender reasonably requires to be delivered by
Borrower in connection with such release. Borrower shall pay all costs, taxes
and expenses associated with the release of the Lien of the Mortgage and the
Assignment of Leases, including Lender’s reasonable attorneys’ fees.  Except as set forth in this Section
2.7(a)(or in Section 2.7(b) below), no repayment, prepayment or
defeasance of all or any portion of the Loan shall cause, give rise to a right
to require, or otherwise result in, the release of the Lien of the Mortgage on
the Mortgaged Property.


 


(b)                                 Partial Defeasance.  
Borrower shall, as a condition to and only in connection with a Partial
Release of a Partial Release Property after the First Open Defeasance Date and
prior to the First Open Prepayment Date as provided in Section 2.17
below, have the right to defease a portion of the Loan (a “Partial
Defeasance”) upon satisfaction of the following conditions:


 


(i)                                     Borrower shall provide Lender at least thirty
(30) days’ prior written notice (or such shorter period of time if permitted by
Lender in its sole discretion) specifying a date (the “Partial Defeasance
Date”) on which Borrower shall have satisfied the conditions in this Section
2.7(b) and on which it shall effect the Partial Defeasance;


 


(ii)                                  Borrower shall pay to Lender (A) all payments
of interest due on the Loan to and including the Partial Defeasance Date and
(B) all other sums, then due under the Note, this Loan Agreement, the Mortgage
and the other Loan Documents;


 


(iii)                               Borrower shall irrevocably deposit the Partial Defeasance Collateral
into the Defeasance Collateral Account and otherwise comply with the provisions
of this Section 2.7(b) and Sections 2.7(c) and (d) hereof;


 


(iv)                              Lender shall prepare (at Borrower’s expense) all necessary documents to
modify this Loan Agreement and to amend and restate the Note and issue two
substitute notes, one note having a principal balance equal to the Partial
Defeasance Amount (the “Defeased Note”), and the other note having a
principal balance equal to the excess of (A) the then-outstanding principal
amount of the Loan, over (B) the amount of the Defeased Note (the “Undefeased
Note”). The Defeased Note and Undefeased Note shall have identical terms as
the Note except for the principal balance and monthly payments.


 


32

















 


The
Defeased Note and the Undefeased Note shall be cross defaulted and cross
collateralized unless the Rating Agencies shall require otherwise or unless a
Successor Borrower that is not an Affiliate of Borrower is established pursuant
to Section 2.7(d). A Defeased Note may not be the subject of any further
defeasance;


 


(v)                                 Borrower shall execute and deliver to Lender
a Security Agreement in respect of the Defeasance Collateral Account and the
Partial Defeasance Collateral;


 


(vi)                              Borrower shall deliver to Lender an opinion of counsel for Borrower
that is customary in commercial lending transactions and subject only to normal
qualifications, assumptions and exceptions opining, among other things, that
(w) Lender has a legal and valid perfected first priority security interest in
the Defeasance Collateral Account and the Partial Defeasance Collateral, (x) if
a Securitization has occurred, the REMIC Trust formed pursuant to such
Securitization will not fail to maintain its status as a “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code as a result
of the Partial Defeasance pursuant to this Section 2.7(b), (y) a Partial
Defeasance pursuant to this Section 2.7 will not result in a deemed
exchange for purposes of the Code and will not adversely affect the status of
the Loan as indebtedness for federal income tax purposes, (z) delivery of the
Partial Defeasance Collateral and the grant of a security interest therein to
Lender shall not constitute an avoidable preference under Section 547 of the
Bankruptcy Code or applicable state law;


 


(vii)                           If and to the extent required by the Rating Agencies, a
non-consolidation opinion with respect to the Successor Borrower;


 


(viii)                        Borrower shall deliver to Lender a confirmation in writing from the
applicable Rating Agencies to the effect that the release of the Partial
Release Property from the Lien of the Mortgage as contemplated by this Section
2.7(b) and the substitution of the Partial Defeasance Collateral will not
result in a downgrading, withdrawal or qualification of the respective ratings
in effect immediately prior to such defeasance for the Certificates issued in
connection with the Securitization which are then outstanding;


 


(ix)                                Borrower shall deliver an officer’s certificate certifying that the requirements
set forth in this Section 2.7 have been satisfied;


 


(x)                                   Borrower shall deliver a certificate of a
nationally recognized public accounting firm reasonably acceptable to Lender
certifying that the Partial Defeasance Collateral will generate monthly amounts
equal to or greater than the Scheduled Defeasance Payments;


 


(xi)                                Borrower shall deliver such other certificates, opinions, documents and
instruments as Lender may reasonably request; and


 


(xii)                             Borrower shall pay all costs and expenses of Lender incurred in
connection with the defeasance, including Lender’s reasonable attorneys’ fees
and expenses and Rating Agency fees and expenses.


 


33

















 


(c)                                  Defeasance Collateral Account.  On
or before the date on which Borrower delivers the Defeasance Collateral,
Borrower or Successor Borrower (as applicable) shall open at any Eligible Bank
the defeasance collateral account (the “Defeasance Collateral Account”)
which shall at all times be an Eligible Account. The Defeasance Collateral
Account shall contain only (i) Defeasance Collateral and (ii) cash from
interest and principal paid on the Defeasance Collateral. All cash from
interest and principal payments paid on the Defeasance Collateral shall be paid
over to Lender on each Payment Date and applied to the monthly installments of
interest on the Loan (and in the case of a Partial Defeasance, the portion
thereof evidenced by the Defeased Note) and, upon Maturity, to accrued interest
and the Principal Balance of the Loan (and in the case of a Partial Defeasance,
the portion thereof evidenced by the Defeased Note)  Borrower shall cause the Eligible Bank at which the Defeasance
Collateral is deposited to enter an agreement with Borrower and Lender,
satisfactory to Lender in its sole discretion, pursuant to which such Eligible
Bank shall agree to hold and distribute the Defeasance Collateral in accordance
with this Loan Agreement. Borrower (or Successor Borrower, as applicable) shall
be the owner of the Defeasance Collateral Account and shall report all income
accrued on Defeasance Collateral for federal, state and local income tax
purposes in its income tax return. Borrower shall prepay all costs and expenses
associated with opening and maintaining the Defeasance Collateral Account.
Lender shall not in any way be liable by reason of any insufficiency in the
Defeasance Collateral Account.


 


(d)                                 Successor Borrower.  In
connection with a Defeasance under this Section 2.7, Borrower shall, if
required by the Rating Agencies or if Borrower so elects or Lender requires,
establish or designate a successor entity (the “Successor Borrower”)
which shall be a single purpose bankruptcy remote entity and which shall be
approved by the Rating Agencies. Any such Successor Borrower may, at Borrower’s
option, be an Affiliate of Borrower unless the Rating Agencies or Lender shall
require otherwise. Borrower shall transfer and assign all obligations, rights
and duties under and to the Note, together with the Defeasance Collateral, to
such Successor Borrower.  Such Successor
Borrower shall assume the obligations under the Note and the Security
Agreement. Borrower shall pay $1,000 to any such Successor Borrower as
consideration for assuming the obligations under the Note and the Security
Agreement. Borrower shall pay all reasonable costs and expenses incurred by
Lender, including Lender’s attorney’s fees and expenses incurred in connection
therewith, and all fees, expenses and other charges of the Rating Agencies.


 


Section
2.8.                                   Application of Payments After Event of
Default.  After an Event of Default, Borrower
irrevocably waives the right to direct the application of any and all payments
at any time hereafter received by Lender from or on behalf of Borrower, and
Borrower irrevocably agrees that Lender shall have the continuing exclusive
right to apply any and all such payments and any and all proceeds and
recoveries from the Pledged Accounts, the Mortgaged Property or Borrower after
the occurrence and during the continuance of an Event of Default, in Lender’s
sole discretion, to the Indebtedness and other amounts then outstanding under
this Agreement, in such order and manner as Lender may determine in its sole
and absolute discretion, including, without limitation, reasonable
out-of-pocket costs and expenses of Lender reimbursable pursuant to the terms
of this Agreement arising as a result of such repayment, any accrued and unpaid
interest then payable with respect to the Loan or the portion thereof being
repaid, the Principal Indebtedness, any accrued and unpaid Prepayment
Consideration in respect of any such Principal Indebtedness or the portion
thereof being repaid, any other sums then due


 


34

















 


and payable to or for the benefit of Lender pursuant
to this Agreement or any other Loan Document(s), or to Property Expenses and
Capital Improvement Costs for the Mortgaged Property, or to fund Reserve
Accounts.


 


Section
2.9.                                   Method and Place of Payment. 
Except as otherwise specifically provided herein, all payments and
prepayments under this Agreement and the Note shall be made to Lender not later
than 12:00 p.m., Eastern time, on the date when due and shall be made in lawful
money of the United States of America by wire transfer in federal or other
immediately available funds to its account at such bank(s) as Lender may from
time to time designate.  Any funds
received by Lender after such time shall, for all purposes hereof, be deemed to
have been paid on the next succeeding Business Day.  Lender shall notify Borrower in writing of any changes in the
account to which payments are to be made. 
All payments made by Borrower hereunder, or by Borrower under the other
Loan Documents, shall be made irrespective of, and without any deduction for,
any defenses, set-offs or counterclaims. 
Whenever any payment to be made hereunder shall be stated to be due on a
day that is not a Business Day, the payment may be made on the next succeeding
Business Day.


 


Section
2.10.                             Taxes.


 


(a)                                  All payments made by or on behalf of Borrower
under this Agreement shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority (the “Tax Liabilities”), excluding net income
taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the
Lender as a result of a present or former connection between such Lender and
the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein including being a
citizen or resident or national of, or carrying on a business or maintaining a permanent
establishment in such jurisdiction (other than any such connection arising
solely from such Lender’s having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement if, at the
time such Lender first became a party to this Agreement, the applicable
Governmental Authority would not have imposed such taxes but instead such taxes
are a result of a change in relevant tax law including, but not limited to a
change in the generally accepted interpretation of existing tax law).  If Borrower shall be required by law to
deduct any such Tax Liabilities (or amounts in estimation or reimbursement for
the same) from or in respect of any sum payable hereunder to Lender, then the
sum payable hereunder shall be increased (such increase, “additional amounts”)
as may be necessary so that, after making all required deductions, Lender
receives an amount equal to the sum it would have received had no such
deductions been made.


 


(b)                                 If Lender is not a “United States person” within
the meaning of Section 7701(a)(30) of the Code (a “Foreign Lender”)
Lender shall deliver to Borrower, prior to receipt of any payment subject to
withholding under the Code (or upon accepting an assignment of an interest
herein), two duly signed completed copies of either Internal Revenue Service (“IRS”)
Form W-8BEN or any successor thereto (relating to Foreign Lender and entitling
it to an exemption from, or reduction of, withholding tax on all payments to be
made to Foreign Lender by Borrower pursuant to this Agreement) or IRS Form
W-8ECI or any successor thereto (relating


 


35

















 


to all payments to be made to Foreign Lender by
Borrower pursuant to this Agreement) or such other evidence satisfactory to Borrower
and Borrower that Foreign Lender is entitled to an exemption from, or reduction
of, U.S. withholding tax, including any exemption pursuant to Section 881(c) of
the Code.  If the form W-8BEN or W-8ECI
provided by Lender at the time such Lender first becomes a party to this
Agreement indicates a United States interest withholding tax rate in excess of
zero, withholding tax at such rate shall be considered excluded from Tax
Liabilities reimbursable by Borrower to Lender under Section 2.10(a)
hereof, except to the extent that such Lender’s assignor (if any) was entitled,
at the time of assignment, to receive additional amounts from Borrower pursuant
to Section 2.10(a).  Thereafter and from
time to time, Foreign Lender shall (i) promptly submit to Borrower such
additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to
Borrower and Borrower of any available exemption from or reduction of, United
States withholding taxes in respect of all payments to be made to Foreign
Lender by Borrower pursuant to this Agreement, (ii) promptly notify Borrower of
any change in circumstances which would modify or render invalid any claimed
exemption or reduction, and (iii) take such steps as shall not be materially
disadvantageous to it, in the reasonable judgment of such Lender, and as may be
reasonably necessary (including the redesignation of its lending office) to
avoid any requirement of applicable laws that Borrower make any deduction or
withholding for taxes from amounts payable to such Foreign Lender.  Notwithstanding any other provision of this
paragraph, a Foreign Lender shall not be required to deliver any form pursuant
to this paragraph that such Foreign Lender is not legally able to deliver.


 


(c)                                  If a Lender transfers its rights and
obligations under this Agreement from its lending office to another lending
office, withholding tax (which shall be set forth in the IRS form or forms
described in this Section 2.10 provided by such Lender to Borrower upon such
transfer, taking into account the transfer) imposed on the Lender after the
transfer in excess of the rate imposed prior to such transfer shall be deemed
to be for purposes of this Agreement excluded from Tax Liabilities reimbursable
by Borrower to Lender for periods after the transfer.  This Section 2.10(c) shall not apply with respect to a
change in lending office required for the particular right or obligation as a
result of any change in, or the adoption or phase-in of, any law, rule or
regulation applicable to such Lender and occurring after the date of this
Agreement and the applicable Lender is unable, using commercially reasonable
efforts, to change such lending office to another lending office that is
subject to a lower withholding tax rate.


 


(d)                                 If any Lender voluntarily changes its
residence or place of business or takes any other similar action, and the
effect of such change or action, as of the date thereof, would be to increase
the Tax Liabilities of such Lender, the Borrower shall not be obligated to pay
any additional amounts in respect of such increase.


 


(e)                                  If and to the extent that a Foreign Lender
sells a participating interest to a participant which, pursuant to Section
9.9(a), seeks to obtain the benefits of Section 2.10, then such Foreign
Lender shall promptly deliver to Borrower (i) two duly signed completed copies
of the forms or statements required to be provided by such Lender as set forth
above, to establish the portion of any such sums paid or payable with respect
to which such Lender acts for its own account that is not subject to U.S.
withholding tax, and (ii) two duly signed completed copies of


 


36

















 


IRS Form W-8IMY (or any successor thereto), together
with any information such Lender chooses to transmit with such form, and any
other certificate or statement of exemption required under the Code, to
establish that such Lender is not acting for its own account with respect to a
portion of any such sums payable to such Lender.  Notwithstanding any other provision of this paragraph, a Foreign
Lender shall not be required to deliver any form pursuant to this paragraph
that such Foreign Lender is not legally able to deliver.


 


(f)                                    For any period with respect to which a Lender
has failed to comply with the requirements of Section 2.10(b), (e) or (h)
(other than to the extent such failure is due to a change in law, rule or
regulation occurring subsequent to the date on which a form originally was
required to be provided), Borrower shall not be required to pay additional
amounts to the Lender pursuant to this Section 2.10 with respect to Tax
Liabilities imposed as a result of such failure.


 


(g)                                 Borrower may, without reduction, withhold any
Tax Liabilities required to be deducted and withheld from any payment under any
of the Loan Documents with respect to which Borrower is not required to pay
additional amounts under this Section 2.10.


 


(h)                                 Upon Borrower’s request, if the Lender is a
“United States person” within the meaning of Section 7701(a)(30) of the Code,
Lender shall, if and to the extent required by law, execute and deliver to
Borrower an IRS Form W-9.


 


Section
2.11.                             Intentionally Omitted.


 


Section
2.12.                             Central Cash Management.


 


(a)                                  Local Collection Accounts; Collection
Account; Deposits to and Withdrawals from the Collection Account.


 


(i)                                     On or before the Closing Date, Lender shall
(1) establish on behalf of the Borrower and maintain with the Collection
Account Bank a collection account (the “Collection Account”), which
shall be an Eligible Account with a separate and unique identification number
in the name of Lender, as secured party, or, at Lender’s option, in the name of
Borrower for the benefit of Lender, as secured party, and (2) cause the
Collection Account Bank to deliver to Lender the Collection Account Agreement
in form and substance reasonably acceptable to Lender acknowledging Lender’s
security interest in and sole dominion and control over the Collection
Account.  On or before the Closing Date,
Borrower may (x) establish and maintain with one or more financial institutions
acceptable to Lender in its sole reasonable discretion (individually each, and
collectively, the “Local Collection Account Bank”), one or more local
collection accounts for the Mortgaged Property (individually each, and
collectively, the “Local Collection Account”) and one or more security
deposit accounts (other than Master Lease Deposits) for the Mortgaged Property
(individually each, and collectively, the “Security Deposit Account”),
each of which shall be an Eligible Account with a separate and unique
identification number and entitled in the same name as the Collection Account
and (y) cause each Local Collection Account Bank to deliver to Lender a Local
Collection Account Agreement in form and substance reasonably acceptable to
Lender acknowledging Lender’s security interest in and sole dominion and
control over each


 


37

















 


Local
Collection Account and Security Deposit Account; provided that Borrower
may deposit, hold and administer security deposits (other than Master Lease
Deposits) from that portion of the Mortgaged Property, if any, located in North
Carolina in a Security Deposit Account maintained with Bank of America, N.A. or
other financial institution with a North Carolina branch reasonably acceptable
to Lender, which, it is understood, may not execute a Local Collection Account
Agreement, although Borrower shall make commercially reasonable efforts to
obtain such financial institution’s execution and delivery of a Local
Collection Account Agreement.  On the
Closing Date, Borrower shall deposit $301,285.64 in the Security Deposit
Account.  On or before the Closing Date,
Lender shall establish on behalf of Borrower and maintain with the Collection
Account Bank a separate account for Master Lease Deposits (the “Master Lease
Deposit Account”), which shall be an Eligible Account and shall have the
same title as the Collection Account, for the benefit of Lender until the Loan
is paid in full.  On the Closing Date
Borrower shall deposit the amount of the Master Lease Deposits in the Master
Lease Deposit Account.  Subject to Section
2.12(a)(ii), Borrower shall


 


(A)                              deposit or cause the Manager to deposit in the Security Deposit Account
(or into the Master Lease Deposit Account, with respect to Master Lease
Deposits) not less than one time during each calendar month all security
deposits in the form of Money received from the tenants, since the date of the
previous deposit (or in the case of the initial deposit, since the Closing
Date),


 


(B)                                deposit or cause the Manager to deposit in the Collection Account or
Local Collection Account, all Rents and Money received from Accounts or under
Leases and derived from the Mortgaged Property and all Proceeds thereof, in
each case on each Business Day following the collection and receipt thereof during
the first seven (7) Business Days of each calendar month and not less than once
during each calendar week of such month commencing after such seventh (7th)
day, and


 


(C)                                sweep or cause to be swept by each Local Collection Account Bank all
Money on deposit in the Local Collection Account in excess of $10,000 (which
the Local Collection Account Bank shall be entitled to use to offset any
returned items) to the Collection Account on each Business Day.


 


Borrower
shall not have any right to withdraw Money from the Local Collection Account,
the Security Deposit Account, the Master Lease Deposit Account or the
Collection Account, which shall be under the sole dominion and control, and the
“control” within the meaning of Sections 9-104 and 9-106 of the UCC, of Lender;
provided, that notwithstanding the foregoing, so long as an Event of
Default has not occurred and is not continuing (or if an Event of Default has
occurred and is continuing but Borrower is required to return the security
deposit in accordance with applicable Legal Requirements), Borrower may
instruct the Local Collection Account Bank to withdraw from the Security
Deposit Account security deposits (other than Master Lease Deposits) in order
to satisfy Borrower’s obligations to return the same to tenants entitled to
them under and in accordance with the Leases. 
Any disbursement of Master Lease Deposits shall in each case be subject
to Lender’s prior approval and direction, provided


 


38

















 


that
Lender shall authorize, upon Borrower’s request made not more frequently than
on a monthly basis, disbursements reflecting any reduction in Master Lease
Deposits to which the tenant under the applicable Master Homesite Lease
Documentation is entitled.  In the event
of a Lease default or other occurrence whereby Borrower, as landlord, shall
become entitled to retain any security deposits or apply the same to amounts
owed under the applicable Lease, any such security deposits so retained and/or
applied by Borrower shall, upon such retention or application, be transferred
from the Security Deposit Account to the Local Collection Account or the
Collection Account and treated in the same manner as Rents; provided,
that in the event of a default under the Master Homesite Lease Documentation
entitling the landlord to retain Master Lease Deposits, the Master Lease
Deposits shall not be transferred to the Collection Account and treated as
Rents but instead shall continue to be held in the Master Lease Deposit Account
as additional collateral for the Indebtedness. 
Any such Rents, Money or Proceeds held by Borrower or the Manager prior
to deposit into the Local Collection Account shall be held in trust for the
benefit of Lender.  Borrower shall be
responsible for the payment of all costs and expenses in connection with
establishing and maintaining the Collection Account, the Local Collection
Account, the Security Deposit Account, the Master Lease Deposit Account and the
Reserve Accounts (including, without limitation, Collection Account Bank’s and
Local Collection Account Bank’s fees and charges) and shall reimburse Lender
upon demand for any such costs or expenses incurred by Lender.


 


(ii)                                  In the event that any Event of Default has
occurred and is continuing,


 


(A)                              upon request of Lender, Borrower shall deliver to each tenant under a
Lease an irrevocable direction letter in a form approved by Lender requiring
the tenant to pay all Rents and other Money under Leases, and any Money
received from Accounts or otherwise derived from the Mortgaged Property and
Proceeds thereof owed to Borrower directly to the Collection Account or (if
Lender elects) a Local Collection Account and shall deliver an irrevocable
direction letter in such form to each tenant under a new Lease entered into
thereafter prior to the commencement of such Lease,


 


(B)                                upon request of Lender, all Rents and Money received from Accounts or
under Leases and derived from the Mortgaged Property and all Proceeds thereof
shall be payable to Lender or as otherwise directed by Lender,


 


(C)                                if a tenant under a Lease forwards any Rents, Money or Proceeds to
Borrower or Manager rather than directly to the Collection Account or
applicable Local Collection Account, Borrower shall (i) if the Lender has made
the request referred to in Section 2,12(a)(ii)(A) above, deliver an additional
irrevocable direction letter to the tenant and make other commercially
reasonable efforts to cause the tenant to thereafter forward such Rents, Money
or Proceeds directly to the Collection Account or (if Lender elects) a Local
Collection Account, and (ii) immediately deposit or cause the Manager to
deposit in the Collection Account any such Rents, Money or Proceeds received by
Borrower or Manager,


 


39

















 


(D)                               Borrower shall not have any right to make or direct any withdrawals
from the Collection Account or the Reserve Account without the prior written
consent of Lender (it being understood and agreed that Borrower may continue to
make withdrawals from the Security Deposit Account as described above), and


 


(E)                                 any and all funds on deposit in the
Collection Account and the Reserve Accounts may be allocated by Lender in its
sole discretion for the payment of the Indebtedness pursuant to Section 2.8
of this Agreement or to the Operating Expense Account, the Working Capital
Reserve Account or the Debt Service Reserve Account.


 


(iii)                               Borrower shall deposit in the Collection Account all Loss Proceeds
received by Borrower.


 


(b)                                 Distribution of Cash.  So
long as an Event of Default has not occurred and is not continuing (and
thereafter at Lender’s sole option and discretion), Lender shall apply funds on
deposit in the Collection Account (to the extent not held in Reserve Accounts
constituting sub-accounts of the Collection Account, if any, and with the
exception of Loss Proceeds, which shall be applied as provided in Section
2.12(e) and Section 5.1(x) of this Agreement) on each Payment Date
as follows:


 


(i)                                     first, to the Real Estate Taxes Escrow Account and the Insurance Escrow Account,
in that order, in the respective amounts required to be deposited therein as
described in Section 2.13(b);


 


(ii)                                  second, to the payment to Lender of any expenses then due and payable to
Lender or its servicer(s) pursuant to this Agreement or the other Loan
Documents;


 


(iii)                               third, to the payment to Lender of the Monthly Debt Service Payment due upon
such Payment Date;


 


(iv)                              fourth, to the Replacement Reserve Account in the amount required to be
deposited therein as described in Section 2.13(a);


 


(v)                                 fifth, to the payment of any outstanding indemnification payment to which an
Indemnified Party is then entitled pursuant to Sections 5.1(i) and 5.1(j),
and any other amounts then due and payable to Lender pursuant to this Agreement
and the other Loan Documents which are not paid from applications under clause
(iii) above;


 


(vi)                              sixth, to the Prepaid Rent Account in the amount required to be deposited
therein as described in Section 2.13(d);


 


(vii)                           seventh, if no Event
of Default exists, to Borrower in an amount equal to remaining available funds,
if any; provided, that if any Event of Default exists, no disbursement
shall be made under this clause seventh; and


 


40

















 


(viii)                        eighth, if any Event
of Default exists, then to the extent Lender has not made other application of
such remaining available funds in Lender’s discretion as provided hereunder,
all remaining available funds shall be allocated as determined by Lender in
Lender’s sole and absolute discretion (and re-allocated from time to time as
Lender may elect) and retained in the Debt Service Reserve Account, the Working
Capital Reserve Account and/or the Operating Expense Account or, at Lender’s
option, in other Lender-controlled accounts.


 


(c)                                  Permitted Investments.  So
long as no Event of Default has occurred and is continuing, Borrower shall
direct Lender in writing to invest and reinvest any balance in the Collection
Account, from time to time in Permitted Investments (subject to the
availability of such Permitted Investments with the Collection Account Bank); provided,
however, that


 


(i)                                     the maturity of the Permitted Investments on
deposit therein shall be at the discretion of Borrower, but in any event no
later than the Business Day immediately preceding the date on which such funds
are required to be withdrawn therefrom pursuant to Section 2.12(a) or 2.12(b)
of this Agreement,


 


(ii)                                  after an Event of Default has occurred and
for so long as such Event of Default is continuing Borrower shall not have any right
to direct investment of the balance in the Collection Account,


 


(iii)                               all such Permitted Investments shall be held in the name of Lender or
its servicer and shall be credited to the Collection Account, and


 


(iv)                              if no written investment direction is provided to Lender by Borrower,
Lender may at Lender’s option invest any balance in the Collection Account in
such Permitted Investments as may be selected by Lender.


 


Lender
shall have no liability for any loss in investments of funds in the Collection
Account that are invested in Permitted Investments and no such loss shall
affect Borrower’s obligation to fund, or liability for funding, the Collection
Account.  All interest paid or other
earnings on funds deposited into the Collection Account made hereunder shall be
deposited into the Collection Account. 
Borrower shall include all earnings on the Collection Account as income
of Borrower for federal and applicable state tax purposes.


 


(d)                                 Intentionally Omitted.


 


(e)                                  Loss Proceeds.  In
the event of a casualty or Taking with respect to the Mortgaged Property, all
of Borrower’s interest in Loss Proceeds shall be paid directly to the
Collection Account.  Subject to the
provisions of Section 5.1(x) of this Agreement, whereby Loss Proceeds
may in certain cases and upon satisfaction of the terms and conditions set
forth in Section 5.1(x) be made available for Restoration, Loss Proceeds
may, at Lender’s option exercised in Lender’s sole discretion, be applied to
the Indebtedness and, upon payment in full of the Indebtedness or, if an Event
of Default exists, in any manner determined by Lender in Lender’s sole
discretion in accordance with Section 2.8 hereof.  If the Loss Proceeds are to be made
available for Restoration pursuant to Section 5.1(x) of this Agreement,
such Loss Proceeds shall be held by Lender in a segregated interest-bearing
Eligible Account in the name of Lender


 


41

















 


and under the sole dominion and control of Lender to
be opened (if not previously opened and maintained by the Collection Account
Bank under the Collection Account Agreement by the Lender) by Lender at a
financial institution selected by Lender (the “Loss Proceeds Account”).  Funds on deposit in the Loss Proceeds
Account shall be invested in Permitted Investments (subject to the availability
of such Permitted Investments with the Collection Account Bank) in the same
manner and subject to the same restrictions as set forth in Section 2.12(c)
with respect to the Collection Account (except that the maturity shall be not
later than as necessary to satisfy any schedule of distributions for
Restoration required or approved by Lender). 
If any Loss Proceeds are received by Borrower, such Loss Proceeds shall
be received in trust for Lender, shall be segregated from other funds of
Borrower, and shall be forthwith paid to Lender to the extent necessary to
comply with this Agreement.


 


Section
2.13.                             Reserve Accounts.


 


(a)                                  Deferred Maintenance Escrow Account and
Replacement Reserve Account.


 


(i)                                     On or before the Closing Date, Lender shall
establish on behalf of Borrower and maintain with the Collection Account Bank
two separate accounts for deferred maintenance and replacement reserves, each
of which shall be an Eligible Account and shall have the same title as the
Collection Account, for the benefit of Lender until the Loan is paid in
full.  The two accounts shall be
designated the “Deferred Maintenance Escrow Account” (the “Deferred
Maintenance Escrow Account”) and the “Replacement Reserve Account” (the “Replacement
Reserve Account”).  On the Closing
Date, Lender shall deposit out of the Loan proceeds $127,043.75 in the Deferred
Maintenance Escrow Account and $6,395.83 in the Replacement Reserve
Account.  On each Payment Date,
commencing with the April 2004 Payment Date, Borrower shall deposit from the
Collection Account (or if the funds for such deposit are not available pursuant
to Section 2.12(b), shall make an additional deposit of Borrower’s funds
sourced from equity capital contributions) to the Replacement Reserve Account,
of an amount equal to the Replacement Reserve Deposit Amount until the amount
on deposit in the Replacement Reserve Account equals the Replacement Reserve
Threshold Amount for the initial time. 
During the period commencing on the April 2004 Payment Date when such
deposits are being made to the Replacement Reserve Account until the funds on
deposit therein equal the Replacement Reserve Threshold Amount for the initial
time, no withdrawals may be made from the Replacement Reserve Account.  After the amount on deposit in the
Replacement Reserve Account equals the Replacement Reserve Threshold Amount for
the initial time, the Borrower may request withdrawals from the Replacement
Reserve Account pursuant to the procedure set forth in Section 2.13(a)(iii)
below.  In the event following such
withdrawal, the amount on deposit in the Replacement Reserve Account shall be
less than the Replacement Reserve Threshold Amount then on each subsequent
Payment Date Borrower shall deposit from the Collection Account (or if the
funds for such deposit are not available pursuant to Section 2.12(b),
shall make an additional deposit of Borrower’s funds sourced from equity
capital contributions) to the Replacement Reserve Account, of an amount equal
to the Replacement Reserve Deposit Amount until the amount on the deposit in
the Replacement Reserve Account once again


 


42

















 


equals
the Replacement Reserve Threshold Amount (following which event the Borrower
shall once again not be obligated to make deposits to the Replacement Reserve
Account).


 


(ii)                                  Any and all Moneys remitted to the Deferred
Maintenance Escrow Account, together with any interest, earnings or income
earned thereon, shall be held in the Deferred Maintenance Escrow Account to be
withdrawn by Lender upon written request of Borrower made not more than once
each month in an amount not less than $10,000, and applied to pay directly or
reimburse Borrower for repairs set forth on Schedule 1 attached hereto
(the “Immediate Repairs”) upon satisfaction of the disbursement
conditions listed on Schedule 6 hereof. 
Within the applicable time period(s) for completion set forth on Schedule
1, Borrower shall complete such Immediate Repairs and shall provide to
Lender such documentation, and other evidence of compliance with law as Lender
may reasonably require. The funds contained in the Deferred Maintenance Escrow
Account shall be utilized by Borrower solely for performance of the Immediate
Repairs in accordance with the Property Condition Assessments and Environmental
Reports, and shall not be used by Borrower for purposes for which any other
Reserve Account is established. Upon written application of Borrower (which may
be done by electronic mail or e-mail), Borrower shall be entitled to obtain
disbursements by Lender from the Deferred Maintenance Escrow Account to pay
costs incurred by Borrower for such Immediate Repairs, provided that (a) no
Event of Default has occurred and is continuing, (b) Borrower shall provide to Lender
(including electronic mail or e-mail) such documentation and certifications as
Lender may reasonably request to substantiate the requirement for and
entitlement to such disbursement, (c) Borrower shall provide to Lender
(including by electronic mail or e-mail) with all invoices, receipts, lien
waivers and other documentation of lawful and workmanlike progress or
completion, lien-free status, and availability of sufficient funds, all as may
be reasonably requested by Lender, and (d) Borrower shall provide Lender such
evidence as may be reasonably satisfactory to Lender that after payment of any
draw for Immediate Repairs, the funds remaining in the Deferred Maintenance
Escrow Account shall be sufficient to pay for the remainder of such Immediate
Repairs.   In the event Borrower
completes the repairs for which funds were reserved in the Deferred Maintenance
Escrow Account to the reasonable satisfaction of Lender, Lender shall disburse
any and all amounts then on deposit in the Deferred Maintenance Escrow Account
to the Collection Account.


 


(iii)                               Subject to the provisions of Section 2.13(a)(i), any and all Moneys
remitted to the Replacement Reserve Account, together with any interest,
earnings or income thereon, shall be held in the Replacement Reserve Account to
be withdrawn by Lender upon written request of Borrower made not more than once
each month in an amount not less than $10,000, and applied to reimburse
Borrower for Capital Improvement Costs (other than those for Immediate Repairs)
reasonably approved by Lender for disbursements from the Replacement Reserve (“Approved
Capital Expenditures”) upon satisfaction of the disbursement conditions
listed on Schedule 6 hereof, provided that funds in the Replacement
Reserve Account shall not be used by Borrower for purposes for which any other
Reserve Account is established.


 


43

















 


(b)                                 Real Estate Taxes Escrow Account and
Insurance Escrow Account.  On or before the Closing Date, Lender shall
on behalf of the Borrower establish and maintain with the Collection Account
Bank two separate accounts for Basic Carrying Costs, each of which shall be an
Eligible Account and shall have the same title as the Collection Account for
the benefit of Lender until the Loan is paid in full.  The two accounts shall be designated the “Real Estate Taxes
Escrow Account” (the “Real Estate Taxes Escrow Account”) and the
“Insurance Escrow Account” (the “Insurance Escrow Account”).  On the Closing Date, the Lender shall
deposit out of the Loan proceeds $165,320.88 in the Real Estate Taxes Escrow
Account and $25,766.76 in the Insurance Escrow Account (i.e. the amount
necessary to meet the first bill with credit for existing monthly escrow
payments made prior to the applicable due date).  With respect to each Payment Date, Borrower shall deposit from
the Collection Account (or, if the funds for such deposit are not available
pursuant to Section 2.12(b), shall make an additional deposit of
Borrower’s funds sourced from equity capital contributions),


 


(1)                                  an amount equal to (1/12th)
one-twelfth of the annual real estate taxes and any other Impositions that if
not paid in a timely manner will result in a Lien on a Mortgaged Property in
the Real Estate Taxes Escrow Account,


 


(2)                                  an amount equal to one-twelfth (1/12th)
of the annual insurance premiums for policies of insurance required to be
maintained by Borrower with respect to the Mortgaged Property pursuant to this
Agreement, and any additional insurance required under any of the other Loan
Documents, in the Insurance Escrow Account.


 


Any
and all Moneys remitted to the Real Estate Taxes Escrow Account or Insurance
Escrow Account (which shall not bear interest for the benefit of Borrower)
shall be held in the Real Estate Taxes Escrow Account or Insurance Escrow
Account to be withdrawn from the Real Estate Taxes Escrow Account or Insurance
Escrow Account, as applicable, by Lender or its servicer upon written request
of Borrower delivered to Lender and its servicer together with documentation
and other evidence (including invoices and in the case of a reimbursement of
Borrower, evidence that the related costs have been paid) with respect to the
respective Basic Carrying Costs towards which such funds are to be applied, and
applied to pay directly (or reimburse Borrower, in the case of insurance
premiums only) for (x) any Impositions (in the case of the Real Estate Taxes
Escrow Account) or (y) any insurance premiums for policies of insurance
required to be maintained by Borrower with respect to the Mortgaged Property
pursuant to this Agreement, and any additional insurance required under any of
the other Loan Documents (in the case of the Insurance Escrow Account).  Borrower shall provide Lender or its
servicer with bills and other documents necessary for payment of Impositions
and insurance premiums at least ten (10) Business Days prior to the due dates
therefor.  In the event the amount on
deposit in the Real Estate Taxes Escrow Account or the Insurance Escrow Account
exceeds the amount due for Impositions by more than one-twelfth (1/12th)
of the annual real estate taxes (in the case of the Real Estate Taxes Escrow
Account) or the amount due for insurance premiums (in the case of the Insurance
Escrow Account), respectively, Lender or its servicer shall in its sole
discretion credit such excess against future payment obligations to the Real
Estate Taxes Escrow Account or the Insurance Escrow Account, as applicable.


 


(c)                                  Operating Expense Account, Working Capital
Reserve Account and the Debt Service Reserve Account.  On
or before the Closing Date, Lender shall on behalf of the


 


44

















 


Borrower establish and maintain with the Collection
Account Bank three accounts for the remittance of funds by Lender or its
servicer in its sole discretion after an Event of Default has occurred and is
continuing, each of which shall be an Eligible Account and shall have the same
title as the Collection Account for the benefit of Lender until the Loan is
paid in full.  The three accounts shall
be designated the “Operating Expense Account” (the “Operating Expense
Account”), the “Working Capital Reserve Account” (the “Working Capital
Reserve Account”) and the “Debt Service Reserve Account” (the “Debt
Service Reserve Account”).  On any
Business Day after the occurrence and during the continuance of an Event of
Default, Lender or its servicer may in its sole discretion deposit into the
Operating Expense Account, the Working Capital Reserve Account or the Debt
Service Reserve Account any funds then on deposit in the Local Collection
Account or the Collection Account.  Any
and all Moneys remitted to the Operating Expense Account, the Working Capital
Reserve Account or the Debt Service Reserve Account shall, until otherwise
applied by Lender from time to time at Lender’s sole discretion during the
existence of any Event of Default, be held in the Operating Expense Account,
the Working Capital Reserve Account or the Debt Service Reserve Account, as
applicable, and applied, if Lender elects in its sole discretion to make such
funds available for such application,


 


(x)                                   with respect to the Operating Expense Account
only, to pay Property Expenses provided for in the Operating Budget approved by
Lender, or for other Property Expenses approved by Lender,


 


(y)                                 with respect to the Working Capital Reserve
Account only, as a working capital reserve up to the then applicable Working
Capital Reserve Amount, as the same adjusts from time to time under the then
applicable Working Capital Budget, or in such greater or lesser amount as
Lender may determine from time to time, with disbursements from time to time at
Lender’s option from the Working Capital Reserve Account to the Operating
Expense Account as working capital needs arise which may not be satisfied from the
funds on hand in the Operating Expense Account, all at the sole election of
Lender, and


 


(z)                                   with respect to the Debt Service Reserve
Account only, applied to pay the Indebtedness at the sole election of Lender;


 


provided, that (1) notwithstanding the foregoing,
Lender may at any time, in its sole discretion, elect to apply the funds on
deposit in the Operating Expense Account and/or the Working Capital Reserve
Account to pay the Indebtedness (including without limitation any Prepayment
Consideration and other amounts due Lender in connection with such prepayment)
while any Event of Default exists, and (2) in the event Lender accepts in
writing a proposed cure of the Event of Default which precipitated the deposits
to the Operating Expense Account, the Working Capital Reserve Account and the
Debt Service Reserve Account and no other Event of Default exists, then the
funds on deposit in the Operating Expense Account, the Working Capital Reserve
Account and the Debt Service Reserve Account shall be released to Borrower.


 


(d)                                 Prepaid Rent Account.  On
or before the Closing Date, Lender shall on behalf of the Borrower establish
and maintain with the Collection Account Bank an account for the remittance of
prepaid Rent designated the Prepaid Rent Account (the “Prepaid Rent Account”)
which shall be an Eligible Account and shall have the same title as Collection


 


45

















 


Account for the benefit of the Lenders until the
Loan is paid in full.  On the Closing
Date, the initial Lender shall deposit out of the Loan proceeds $0.00 in the
Prepaid Rent Account, which shall be an estimate of prepaid Rent held by
Borrower.  At least five (5) Business
Days prior to the First Payment Date, Borrower will provide to Lender a
certified prepaid rent roll in the form attached as Schedule 9 showing
the amount of prepaid Rent held by Borrower, and the amount of the prepaid Rent
deposited in the Prepaid Rent Account shall be adjusted accordingly on the
First Payment Date, by a transfer of funds between the Collection Account and
the Prepaid Rent Account.  On any
Payment Date as of which the most recent Monthly Statement indicates that the
prepaid Rent exceeds $15,000, Lender shall deposit or cause to be deposited in
the Prepaid Rent Account pursuant to clause sixth of Section 2.12(b) an amount
equal to the positive difference, if any, between the amount indicated in the
Monthly Statement and the amount then on deposit in the Prepaid Rent
Account.  On any Payment Date as of
which the most recent Monthly Statement indicates that the prepaid Rent exceeds
$15,000 but is less than the amount then on deposit in the Prepaid Rent
Account, the Lender shall withdraw from the Prepaid Rent Account and transfer
to the Collection Account the positive difference between the amount on deposit
in the Prepaid Rent Account and such amount contained in the most recent
Monthly Statement to be applied together with the other collections from the
Mortgaged Properties pursuant to Section 2.12(b) on such Payment Date.  On any Payment Date as of which the most
recent Monthly Statement indicates that the prepaid Rent which was previously
in excess of $15,000 has been reduced below $15,000, the Lender shall withdraw
from the Prepaid Rent Account and transfer to the Collection Account the entire
amount of funds then on deposit in the Prepaid Rent Account to be applied
together with the other collections from the Mortgaged Properties pursuant to
Section 2.12(b) on such Payment Date. 
In the event of and after a release of a Mortgaged Property, all of the
references above in this paragraph to $15,000 shall be adjusted to equal
one-twelfth (1/12th) of the product of 5.60% and the Underwritten Net Cash Flow
of all of the remaining Mortgaged Properties.


 


(e)                                  Investment of Funds.  All
or a portion of any Moneys in the Reserve Accounts (other than the Real Estate
Tax Escrow Account, the Insurance Escrow Account, the Operating Expense
Account, the Working Capital Reserve Account and the Debt Service Reserve
Account, none of which shall bear interest for the benefit of Borrower) shall,
so long as no Event of Default has occurred and is continuing, be invested and
reinvested by Lender in accordance with written instructions delivered by
Borrower, or after an Event of Default has occurred and is continuing, by
Lender, in one or more Permitted Investments (subject to the availability of
such Permitted Investments with the Collection Account Bank).  If no written investment direction is
provided to Lender by Borrower, Lender may at its option invest such Moneys in
a Permitted Investment selected by Lender. 
All interest paid or other earnings on funds deposited into the Reserve
Accounts made hereunder shall be deposited into the Reserve Accounts (other than
with respect to the Real Estate Taxes Escrow Account and the Insurance Escrow
Account for which Lender and its servicer shall not have any obligation to
deposit such interest or earnings into such accounts).  Lender shall have no liability for any loss in
investments of funds in any Reserve Account that are invested in Permitted
Investments and no such loss shall affect Borrower’s obligation to fund, or
liability for funding, the Reserve Accounts. 
Unless and until title to the funds therein shall have vested in any
Person other than Borrower, Borrower shall include all such income or gain on
any account of the Reserve Account as income of Borrower for federal and
applicable state tax purposes.


 


46

















 


(f)                                    Event of Default. 
After an Event of Default has occurred and is continuing, Borrower shall
not be permitted to make any withdrawal(s) from any Pledged Accounts and Lender
may liquidate any Permitted Investments of the amount on deposit in such
account, withdraw and use such amount on deposit in the Pledged Accounts to
make payments on account of the Indebtedness or otherwise as provided in Section
2.8.  Without in any way limiting
the foregoing or Lender’s rights and remedies upon an Event of Default, and
subject to Lender’s direction otherwise from time to time, in whole or in part,
in Lender’s sole and absolute discretion, after and during the continuance of
an Event of Default Lender may direct the Collection Account Bank or the Local
Collection Account Bank to disburse to Lender or allocate all available funds
on deposit in the Pledged Accounts to: (a) any debt service or other
Indebtedness due under this Loan Agreement or the other Loan Documents; (b) any
Reserve Account established under this Loan Agreement; (c) otherwise as a
reserve for Property Expenses, Capital Improvement Costs, Impositions and other
expenditures relating to the use, management, operation or leasing of the
Mortgaged Property; and/or (d) any costs and expenses incurred by Lender in
connection with such Event of Default, or expended by Lender to protect or
preserve the value of the Mortgaged Property.


 


Section
2.14.                             Additional Provisions Relating to the Pledged
Accounts.


 


(a)                                  Borrower covenants and agrees that:  (i) all securities or other property
underlying any financial assets credited to any Pledged Account shall be
registered in the name of Lender, indorsed to Lender or indorsed in blank or
credited to another securities account maintained in the name of Lender and in
no case will any financial asset credited to any Pledged Account be registered
in the name of Borrower, payable to the order of Borrower or specially indorsed
to Borrower except to the extent the foregoing have been specially indorsed to
Lender or in blank; and (ii) all Permitted Investments and all other property
delivered to Lender pursuant to this Agreement will be promptly credited to one
of the Pledged Accounts.


 


(b)                                 Borrower hereby agrees that each item of
property (whether investment property, financial asset, security, instrument,
cash or otherwise) credited to any Pledged Account shall be treated as a
“financial asset”  within the meaning of
Section 8-102(a)(9) of the UCC.


 


(c)                                  Borrower acknowledges and agrees that the
Collection Account Bank and Local Collection Account Bank shall comply with all
“entitlement orders” (i.e. an order directing transfer or redemption of any
financial asset relating to a Pledged Account, and any “entitlement order” as
defined in Section 8-102(a)(8) of the UCC) and instructions (including any
“instruction” within the meaning of Section 9-104 of the UCC) originated by
Lender without further action or consent by Borrower, Manager or any other
Person.


 


(d)                                 Regardless of any provision in any other
agreement, for purposes of the UCC, with respect to each Pledged Account, New
York shall be deemed to be the bank’s jurisdiction (within the meaning of
Section 9-304 of the UCC) and the securities intermediary’s jurisdiction
(within the meaning of Section 8-110 of the UCC). The Pledged Accounts shall be
governed by the laws of the State of New York.


 


47

















 


(e)                                  Except for the claims and interest of Lender
and of Borrower in the Pledged Accounts, Borrower represents and warrants that
it does not know of any Lien on or claim to, or interest in, any Pledged
Account or in any “financial asset” (as defined in Section 8-102(a) of the UCC)
credited thereto.  If any Person asserts
any Lien, encumbrance or adverse claim (including any writ, garnishment,
judgment, warrant of attachment, execution or similar process) against the
Pledged Accounts or in any financial asset carried therein, Borrower will
promptly notify Lender thereof and shall indemnify, defend and hold Lender and
each of the Indemnified Parties harmless from and against any such Lien, encumbrance
or claim.


 


Section
2.15.                             Security Agreement.


 


(a)                                  Pledge of Pledged Accounts.  To
secure the full and punctual payment and performance of all of the
Indebtedness, Borrower hereby assigns, conveys, pledges and transfers to
Lender, as secured party, and grants Lender a first and continuing security
interest in and to, the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located (collectively,
the “Account Collateral”):


 


(i)                                     all of Borrower’s right, title and interest
in the Pledged Accounts and all Money and Permitted Investments, if any, from
time to time deposited or held in the Pledged Accounts or purchased with funds
or assets on deposit in the Pledged Accounts;


 


(ii)                                  all of Borrower’s right, title and interest
in interest, dividends, Money, Instruments and other property from time to time
received, receivable or otherwise payable in respect of, or in exchange for,
any of the foregoing until such time as such items are disbursed from the Pledged
Accounts; and


 


(iii)                               to the extent not covered by clause (i) or (ii) above,
all Proceeds of any or all of the foregoing until such time as such items are
disbursed from the Pledged Accounts.


 


Lender
and Collection Account Bank and Local Collection Account Bank, each as agent
for Lender, shall have with respect to the foregoing collateral, in addition to
the rights and remedies herein set forth, all of the rights and remedies
available to a secured party under the UCC, as if such rights and remedies were
fully set forth herein.


 


(b)                                 Covenants; Sole Dominion and Control.  So
long as any portion of the Indebtedness is outstanding, Borrower shall not open
any account other than the Local Collection Account for the deposit of Rents or
Money received from Accounts or under Leases and derived from the Mortgaged
Property and all Proceeds to pay amounts owing hereunder, other than any
account for amounts required by law to be segregated by Borrower.  Borrower shall not have any right to
withdraw Money from the Pledged Accounts. 
Borrower acknowledges and agrees that the Pledged Accounts are and shall
at all times continue to be subject to and under the sole dominion and control,
and the “control” within the meaning of Sections 9-104 and 9-106 of the UCC, of
Lender.  Notwithstanding anything set
forth herein to the contrary, neither Borrower nor Manager nor any other person
or entity, through or under Borrower, shall have any control over the use of,
or any right to withdraw any amount from, any Pledged Accounts, and Borrower
acknowledges that the Collection Account Bank and the Local Collection Account
Bank shall


 


48

















 


comply with all instructions originated by Lender
without further consent by Borrower. 
Borrower acknowledges and agrees that the Collection Account Bank and
Local Collection Account Bank shall comply with the instructions of Lender with
respect to the Pledged Accounts without the further consent of Borrower or
Manager.  The Account Collateral shall
be subject to such applicable laws, and such applicable regulations of the
Board of Governors of the Federal Reserve System and of any other banking
authority or Governmental Authority, as may now or hereafter be in effect, and
to the rules, regulations and procedures of the financial institution where the
Account Collateral is maintained relating to demand deposit accounts generally
from time to time in effect.


 


(c)                                  Financing Statements; Further Assurances. 
Borrower hereby irrevocably authorizes Lender at any time and from time
to time to file any financing statements or continuation statements, and
amendments to financing statements, in any jurisdictions and with any filing
offices as Lender may determine, in its sole discretion, are necessary or
advisable to perfect the security interests granted to Lender in connection
herewith.  Such financing statements may
describe the collateral in the same manner as described in any security
agreement or pledge agreement entered into by the parties in connection
herewith or may contain an indication or description of collateral that
describes such property in any other manner as Lender may determine, in its
sole discretion, is necessary, advisable or prudent to ensure the perfection of
the security interest in the collateral granted to Lender in connection
herewith, including, without limitation, describing such property as “all
assets” or “all personal property” of Borrower whether now owned or hereafter
acquired.  From time to time, at the
expense of Borrower, Borrower shall promptly execute and deliver all further
instruments, and take all further action, that Lender may reasonably request,
in order to continue the perfection and protection of the pledge and security
interest granted or purported to be granted hereby.


 


(d)                                 Transfers and Other Liens. 
Borrower shall not sell or otherwise dispose of any of the Account
Collateral other than pursuant to the terms of this Agreement and the other
Loan Documents, or create or permit to exist any Lien upon or with respect to
all or any of the Account Collateral, except for the Lien granted to Lender
under or as contemplated by this Agreement.


 


(e)                                  No Waiver.  Every right and remedy
granted to Lender under this Agreement or by law may be exercised by Lender at
any time and from time to time, and as often as Lender may deem it
expedient.  Any and all of Lender’s
rights with respect to the pledge of and security interest in the Account
Collateral granted hereunder shall continue unimpaired, and to the extent
permitted by law, Borrower shall be and remain obligated in accordance with the
terms hereof, notwithstanding (i) any proceeding of Borrower under the United
States Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or
statutes of any state, (ii) the release or substitution of Account Collateral
at any time, or of any rights or interests therein or (iii) any delay,
extension of time, renewal, compromise or other indulgence granted by Lender in
the event of any Default with respect to the Account Collateral or otherwise
hereunder.  No delay or extension of
time by Lender in exercising any power of sale, option or other right or remedy
hereunder, and no notice or demand which may be given to or made upon Borrower
by Lender, shall constitute a waiver thereof, or limit, impair or prejudice
Lender’s right, without notice or demand, to take any action against Borrower
or to exercise any other power of sale, option or any other right or remedy.


 


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(f)                                    Lender Appointed Attorney-In-Fact. 
Borrower hereby irrevocably constitutes and appoints Lender as
Borrower’s true and lawful attorney-in-fact, with full power of substitution,
at any time after the occurrence and during the continuation of an Event of
Default, to execute, acknowledge and deliver any instruments and to exercise
and enforce every right, power, remedy, option and privilege of Borrower with
respect to the Account Collateral, and do in the name, place and stead of
Borrower, all such acts, things and deeds for and on behalf of and in the name
of Borrower with respect to the Account Collateral, which Borrower could or
might do or which Lender may deem necessary or desirable to more fully vest in
Lender the rights and remedies provided for herein with respect to the Account
Collateral and to accomplish the purposes of this Agreement.  The foregoing powers of attorney are
irrevocable and coupled with an interest and shall terminate upon repayment of
the Indebtedness in full.


 


(g)                                 Continuing Security Interest; Termination.  This
Section 2.15 shall create a continuing pledge of and security interest
in the Account Collateral and shall remain in full force and effect until
payment in full by Borrower of the Indebtedness.  Upon payment in full by Borrower of the Indebtedness, Lender
shall return to Borrower such of the Account Collateral as shall not have been
applied pursuant to the terms hereof, and shall execute such instruments and
documents as may be reasonably requested by Borrower to evidence such
termination and the release of the pledge and lien hereof.


 


Section
2.16.                             Mortgage Recording Taxes.  The
Lien to be created by the Mortgages is intended to encumber the Mortgaged
Property to the full extent of the Loan Amount; provided, that,
notwithstanding the foregoing, with respect to any Mortgaged Property located
in a state that imposes mortgage recording taxes where the imposition of a
lower amount would allow tax savings to the Borrower, the Lien to be created by
the related Mortgage is intended to encumber the Mortgaged Property in an
amount acceptable to the Lender which amount shall in no event be less than
125% of the value of the Mortgaged Property as determined by the Lender
Appraisals.  On the Closing Date,
Borrower shall have paid all state, county and municipal recording and all
other taxes imposed upon the execution and recordation of the Mortgages, if
any.


 


Section
2.17.                             Partial Release. 
After the First Open Defeasance Date and prior to the First Open Payment
Date, and provided no Event of Default exists, Borrower may from time to time
obtain a partial release (a “Partial Release”) from the lien of the
Mortgage and the Loan Documents of up to two of the individual Mortgaged
Properties listed on Schedule 2.17 hereto (each such individual
Mortgaged Property to be released, a “Partial Release Property”),
provided that all of the following conditions precedent have been satisfied
with respect to any such Partial Release of any such Partial Release Property:


 


(a)                                  No Partial Release of a Partial Release
Property will be permitted until after the First Open Defeasance Date or if any
Event of Default has occurred and is continuing. No Partial Release of the
Partial Release Property will be permitted on or after the First Open Payment
Date.  No more than two Partial Release
Properties may be released during the term of the Loan.


 


(b)                                 No Partial Release of the Partial Release
Parcel will be permitted unless Borrower establishes to Lender’s satisfaction
that the Debt Service Coverage Ratio for the


 


50

















 


remainder of the Mortgaged Property (i.e., exclusive
of any income from the Partial Release Property) is and shall continue to be
equal to or greater than the greater of (i) the Debt Service Coverage Ratio for
the Mortgaged Property calculated immediately prior to the Partial Release
(i.e., inclusive of the income from the Partial Release Property), and (ii)
1.30:1.00.  If the foregoing condition
would not be satisfied by defeasance of the Partial Defeasance Amount indicated
in subparagraph (e) below, Borrower may by written notice to Lender given not
less than ten (10) days prior to the Partial Defeasance increase the Partial
Defeasance Amount to an amount which would result in the foregoing condition
being satisfied upon completion of the Partial Defeasance of such larger
Partial Defeasance Amount.  No Partial
Defeasance, nor any increase in any Partial Defeasance Amount under this
paragraph (b) or paragraphs (c) below, shall affect the allocated loan amounts
for the remaining Mortgaged Property as set forth on Schedule 2.17.


 


(c)                                  No Partial Release of the Partial Release
Parcel will be permitted unless Borrower establishes to Lender’s satisfaction
that the value of the remainder of the Mortgaged Property (as determined by
then-current Appraisals prepared by Appraisers approved by Lender, the fees and
expenses of which shall be paid by Borrower) is sufficient to satisfy a
loan-to-value ratio (based on the outstanding principal balance of the Loan
immediately prior to the Partial Release, less the allocated loan amount for
the Partial Release Property) which is the lesser of (i) 75% and (ii) the
loan-to-value ratio for the Mortgaged Property (inclusive of the Partial
Release Property, and based on the outstanding principal balance of the Loan
immediately prior to the Partial Release) calculated immediately prior to the
Partial Release.  If the foregoing
condition would not be satisfied by defeasance of the Partial Defeasance Amount
indicated in subparagraph (e) below, Borrower may by written notice to Lender
given not less than ten (10) days prior to the Partial Defeasance increase the
Partial Defeasance Amount to an amount which would result in the foregoing
condition being satisfied upon completion of the Partial Defeasance of such
larger Partial Defeasance Amount.


 


(d)                                 The Partial Release shall be allowed only in
connection with a bona fide all-cash sale of the Partial Release Parcel to an
unaffiliated third party on arms-length terms and conditions, and upon closing
of such sale (and thereafter) shall not be owned, purchased or acquired by
Borrower or any Affiliate of Borrower.


 


(e)                                  Borrower will on the date of the Partial
Release (the “Partial Release Date”) complete a Partial Defeasance,
pursuant to Section 2.7 hereof, of a portion of the Loan (the “Partial
Defeasance Amount” for such Partial Release Property) equal to 125% of the
allocated loan amount for the Partial Release Property set forth on Schedule
2.17 hereto; provided, that if Borrower elects in connection with a
Partial Defeasance of a Partial Release Property to increase the Partial
Defeasance Amount for such Partial Release Property pursuant to the provisions
of paragraphs (b) and/or (c) above, the Partial Defeasance Amount for such
Partial Release Property shall be such higher amount for purposes of such
Partial Defeasance.


 


(f)                                    Borrower will execute (and Guarantor will
consent in writing thereto and reaffirm their obligations under the Loan
Documents to which they are a party notwithstanding the Partial Release) and
deliver all such amendments to the Loan Documents and other instruments or
documents as may be required by Lender (using commercial standards


 


51

















 


customarily applied with respect to mortgage loans
such as the Loan) in order to continue to fully protect Lender’s lien and
security interest in the remainder of the Mortgaged Property.


 


(g)                                 Borrower will cause the Master Homesite
Lease(s) to be amended to exclude the Partial Release Property pursuant to
documentation reasonably satisfactory to Lender.


 


(h)                                 Borrower, at its sole cost and expense, shall
obtain endorsements to Lender’s loan policy of title insurance satisfactory in
form and content to Lender, which endorsements will (a) affirmatively evidence
the continued validity of Lender’s first lien position created by the Loan
Documents through the date of recordation of the partial release of the Partial
Release Property, and (b) insure that the lien created by the Loan Documents
remains a valid first lien on the remainder of the Mortgaged Property.


 


(i)                                     Borrower shall pay for the costs of preparing
and recording partial releases, UCC-3 releases, and any loan modification
documents, easements, declarations, and/or restrictive covenants required by
Lender, Lender’s reasonable attorneys’ fees and costs, all survey charges and
costs, all title premiums and costs, documentary stamps incurred in connection
with the release of the Partial Release Property in accordance with the
requirements contained herein, and all other reasonable out-of-pocket costs,
fees, and expenses incurred by Lender in connection with the requested release
of the Partial Release Property.


 


(j)                                     Borrower shall have provided Lender with a
Rating Confirmation with respect to the Partial Release.


 


(k)                                  Borrower shall pay Lender’s reasonable costs
and expenses in connection with the Partial Release, as set forth below.


 


Borrower
shall pay or reimburse Lender for all reasonable costs and expenses incurred by
Lender in connection with such request for a Partial Release, including, but
not limited to, the preparation, negotiation and review of any and all
materials required to be provided in connection therewith (including Lender’s
reasonable attorneys’ fees and expenses).


 


Section
2.18.                             Laundry Leases. 
Certain laundry facilities at certain of the Mortgaged Properties have
been leased to laundry operators under laundry room or laundry facility leases
(the “Laundry Leases”).  Borrower
covenants and agrees that it shall, within sixty (60) days after the date
hereof (or such longer time as Lender may determine to provide to Borrower at
Lender’s sole option) provide copies of such Laundry Leases to Lender and, if
such Laundry Leases are not by their terms subordinate to the applicable
Mortgages, Borrower shall, within sixty (60) days after the date hereof (or
such longer time as Lender may determine to provide to Borrower at Lender’s
sole option) either provide executed subordination agreements subordinating the
Laundry Leases to the applicable Mortgages or demonstrate to Lender’s
reasonable satisfaction that the Laundry Leases may be terminated by the
landlord thereunder at a cost per Laundry Lease of not more than $10,000.


 


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ARTICLE III.

CONDITIONS PRECEDENT


 


Section
3.1.                                   Conditions Precedent to Closing.  The
obligation of the Lender to make the Loan is subject to the satisfaction by
Borrower (and Guarantor, where applicable) or waiver by Lender in writing of
the following conditions no later than the Closing Date:


 


(a)                                  Loan Agreement. 
Borrower and Lender shall have executed and delivered this Agreement.


 


(b)                                 Note.  Borrower shall have executed
and delivered to Lender the Note.


 


(c)                                  Environmental Indemnity Agreement; Guaranty
of Non-Recourse Obligations.  Borrower and Guarantor shall have executed
and delivered the Environmental Indemnity Agreement to Lender.  Guarantor shall have executed and delivered
the Guaranty of Non-Recourse Obligations.


 


(d)                                 Opinions of Counsel. 
Lender shall have received from counsel to Borrower, the Member and the
Guarantor, legal opinions in form and substance acceptable to Lender, with
respect to corporate matters and with respect to substantive non-consolidation
of Affordable Residential Communities LP, the Member and the Manager, on the one
hand, and Borrower, on the other, in the event of the bankruptcy of Affordable
Residential Communities LP, the Member or the Manager.  Such legal opinions shall be addressed to
Lender and its successors and assigns, dated the Closing Date, and in form and substance
reasonably satisfactory to Lender and its counsel.


 


(e)                                  Organizational Documents. 
Lender shall have received with respect to each of Borrower, the Member
and the Guarantor its certificate of formation, certificate of limited
partnership or certificate of incorporation, as applicable, as amended,
modified or supplemented to the Closing Date, as filed with the Secretary of
State in the jurisdiction of organization and in effect on the Closing Date and
certified to be true, correct and complete by the appropriate Secretary of
State as of a date not more than thirty (30) days prior to the Closing Date,
together with a good standing certificate from such Secretary of State dated
not more than thirty (30) days prior to the Closing Date and, for Borrower and
the Member to the extent required by applicable law, a good standing
certificate from the Secretaries of State (or the equivalent thereof) of each
other State in which Borrower or the Member is required to be qualified to
transact business, each dated not more than thirty (30) days prior to the
Closing Date.


 


(f)                                    Certified Resolutions, etc. 
Lender shall have received a certificate of each of Borrower, the Member
and the Guarantor dated the Closing Date, certifying (i) the names and true
signatures of its incumbent officers authorized to sign the Loan Documents to
which Borrower, the Member or the Guarantor is a party, (ii) the Organizational
Agreement of each of Borrower, the Member and Guarantor, in each case as in
effect on the Closing Date, (iii) the resolutions of each of Borrower, the
Member and the Guarantor, approving and authorizing the execution, delivery and
performance of the Loan Documents to which it is a party, and (iv) that there
have been no changes in any Organizational Agreement since the date of
execution or preparation thereof.


 


53

















 


(g)                                 Additional Matters. 
Lender shall have received such other certificates, opinions, documents
and instruments relating to the Loan as may have been reasonably requested by
Lender.  All corporate and other
organizational proceedings, all other documents (including, without limitation,
all documents referred to herein and not appearing as exhibits hereto) and all
legal matters in connection with the Loan shall be reasonably satisfactory in
form and substance to Lender in its sole and absolute discretion.


 


(h)                                 Transaction Costs. 
Borrower shall have paid all Transaction Costs for which bills have been
submitted in accordance with the provisions of Section 8.23.


 


(i)                                     No Default or Event of Default.  No
event which would constitute either a Default or Event of Default under this
Agreement or the other Loan Documents shall have occurred and be continuing on
the Closing Date.


 


(j)                                     No Injunction.  No
law or regulation shall have been adopted, no order, judgment or decree of any
Governmental Authority shall have been issued, and no litigation shall be
pending or threatened, which in the good faith judgment of Lender would enjoin,
prohibit or restrain, or impose or result in the imposition of any material
adverse condition upon, the making or repayment of the Loan or the consummation
of the Transaction.


 


(k)                                  Representations and Warranties.  The
representations and warranties herein and in the other Loan Documents shall be
true and correct in all material respects on the Closing Date.


 


(l)                                     Survey; Appraisal. 
Lender shall have received the Survey and the Appraisal with respect to
each Mortgaged Property, which shall be in form and substance satisfactory to
Lender in its sole and absolute discretion.


 


(m)                               Property Condition Assessment. 
Lender shall have received the Property Condition Assessment with
respect to each Mortgaged Property prepared by the Engineer or another Person
acceptable to the Lender, which Property Condition Assessment shall be
acceptable to Lender in its sole and absolute discretion.


 


(n)                                 Environmental Matters. 
Lender shall have received an Environmental Report prepared by an
Environmental Auditor with respect to the Mortgaged Property, which Environmental
Report shall be acceptable to Lender in its sole and absolute discretion.


 


(o)                                 Financial Information. 
Lender shall have received financial information relating to the
Guarantor, Borrower and the Mortgaged Property satisfactory to Lender in its
sole and absolute discretion.  Such
information shall include, without limitation, the following, to the extent
reasonably available:


 


(i)                                     operating statements for the current year
(including actual to date information, an annual budget and trailing twelve
month data in hard copy and on diskette) and for not less than the three
preceding years;


 


(ii)                                  a copy of the standard lease form, if any;


 


54

















 


(iii)                               current property rent roll data on a tenant by tenant basis in hard
copy including the name of each tenant and the associated Homesite, security
deposit, amount due at the beginning of the month, charges in the current month
(including Homesite rent, water/sewer, gas/electric, trash, mobile home rent,
notes and other charges), payments made during the month, amount due at the end
of the month, total Homesites at the Mortgaged Property and total occupied
Homesites at the Mortgaged Property, with the occupancy level expressed as a
percentage);


 


(iv)                              the tax bills for 2003 and the historical tax records for 2002;


 


(v)                                 the most recent annual financial statements
and unaudited quarterly financial statements; and


 


(vi)                              such other financial information as is customarily required by
institutional lenders for loans similar in size and type as the Loan.


 


The
annual financial statements relating to the Guarantor shall be either (x)
audited by a “Big Four” accounting firm or another firm of certified public
accountants reasonably acceptable to Lender or (y) prepared in accordance with
agreed upon procedures reasonably acceptable to Lender to be performed by a
“Big Four” accounting firm or another firm of certified public accountants
reasonably acceptable to Lender to create similar information.


 


(p)                                 Pro-Forma Financial Statement; Operating
Budget.  Lender shall have received (i) the initial
pro-forma financial statement and Operating Budget for the Mortgaged Property
for the following twelve months (including on an annual and monthly basis a
break-down of projected Gross Revenues, Property Expenses, Capital Improvement
Costs, replacement reserve costs and average occupancy level (expressed as a
percentage)) and (ii) a financial statement that forecasts projected revenues
and operating expenses for not less than three years (including the assumptions
used in such forecast).


 


(q)                                 Site Inspection. 
Borrower shall have provided to Lender the opportunity to perform, or
cause to be performed on its behalf, an on-site due diligence review of the
Mortgaged Property, which inspection is satisfactory to Lender in its sole
discretion.


 


(r)                                    Mortgaged Property Documents.


 


(i)                                     Mortgages; Assignments of Rents and Leases. 
Borrower shall have executed and delivered to Lender the Mortgages and
the Assignments of Rents and Leases with respect to the Mortgaged Property and
such Mortgages and Assignments of Rents and Leases shall have been filed of
record in the appropriate filing office in the jurisdiction in which the
Mortgaged Property is located or irrevocably delivered to a title agent for
such recordation.


 


(ii)                                  Financing Statements. 
Borrower shall have executed and delivered to Lender all financing
statements required by Lender pursuant hereto and such financing statements
shall have been filed of record in the appropriate filing offices in each of the
appropriate jurisdictions or irrevocably delivered to a title agent for such
recordation.


 


55

















 


(iii)                               Management Agreement and Manager’s
Subordination.  Lender shall have received the executed
Management Agreement for the Mortgaged Property and the Manager shall have
executed and delivered the Manager’s Subordination to Lender.


 


(iv)                              Contract Assignment. 
With respect to the Mortgaged Property, Borrower shall have executed and
delivered to Lender a Contract Assignment with respect to the Mortgaged
Property.


 


(s)                                  Opinions of Counsel. 
Lender shall have received from counsel to Borrower reasonably
acceptable to Lender in each state in which any Mortgaged Property is located
its legal opinion in form and substance satisfactory to Lender, as to (i) the
enforceability of the Mortgages, Assignments of Rents and Leases and any other
Loan Documents governed by the law of such jurisdiction, (ii) perfection of
Liens and security interests and (iii) other matters referred to therein with
respect to each Mortgaged Property.  The
legal opinions will be addressed to Lender and its successors and assigns,
dated the Closing Date, and in form and substance reasonably satisfactory to
Lender and its counsel.


 


(t)                                    Insurance.  Lender shall have received
certificates of insurance demonstrating insurance coverage in respect of each
Mortgaged Property of types, in amounts, with insurers and otherwise in
compliance with the terms, provisions and conditions set forth in this
Agreement.  Such certificates shall
indicate that Lender is a named additional insured and shall contain a loss
payee endorsement in favor of Lender with respect to the property policies
required to be maintained under this Agreement.


 


(u)                                 Title Insurance Policy.  Lender
shall have received countersigned pro forma title policies or marked binders
constituting the unconditional commitment (in form and substance reasonably
satisfactory to Lender) to issue the Title Insurance Policy covering the
Mortgaged Property with an aggregate amount at least equal to the Loan Amount.


 


(v)                                 Lien Search Reports. 
Lender shall have received satisfactory reports of UCC (collectively,
the “UCC Searches”), tax lien, judgment and litigation searches and
title updates conducted by the companies issuing the Title Insurance Policy
with respect to the Collateral, Guarantor, Borrower and the Member, such
searches to be conducted in each of the locations required by Lender.


 


(w)                               Consents, Licenses, Approvals, etc. 
Lender shall have received copies of all consents, licenses and
approvals, if any, required in connection with the execution, delivery and
performance by Borrower, Member and Guarantor and the validity and
enforceability, of the Loan Documents, and such consents, licenses and
approvals shall be in full force and effect.


 


(x)                                   Additional Real Estate Matters. 
Lender shall have received such other real estate related certificates
and documentation relating to the Mortgaged Property as Lender may have
reasonably requested.  Such documentation
shall include the following as requested by Lender and to the extent reasonably
available:


 


(i)                                     certificates of occupancy issued by the
appropriate Governmental Authorities of the jurisdiction in which each
Mortgaged Property is located reflecting, and consistent with, the use of each
Mortgaged Property as of the Closing Date;


 


56

















 


(ii)                                  letters from the appropriate local
Governmental Authorities of the jurisdiction in which each Mortgaged Property
is located, certifying that each Mortgaged Property is in compliance with all
applicable zoning laws, rules and regulations, a zoning endorsement to the
applicable Title Insurance Policy with respect to each Mortgaged Property
and/or an acceptable zoning letter from Zoning Information Services Inc.;


 


(iii)                               copies of the Leases in effect at each Mortgaged Property as Lender may
request (in addition to the copies delivered above); and


 


(iv)                              a certified copy of the purchase and sale agreement (with exhibits), if
any, for the Mortgaged Property.


 


(y)                                 Closing Statement. 
Lender and Borrower shall have agreed upon a detailed closing statement
in a form reasonably acceptable to Lender, which includes a complete
description of Borrower’s sources and uses of funds on the Closing Date.


 


(z)                                   Loan-to-Value Ratio; Debt Service Coverage
Test.  Lender shall have determined that (i) the
Loan Amount is not greater than 80% of the aggregate value of the Mortgaged
Property as set forth in the Appraisals delivered on the Closing Date and (ii)
the Debt Service Coverage Test is satisfied as of the Closing Date.


 


(aa)                            Origination Fee. 
Lender shall have received its Origination Fee, which may be retained by
Lender from the proceeds of the Loan.


 


Section
3.2.                                   Execution and Delivery of Agreement.  The
execution and delivery of this Agreement by each party to this Agreement shall
be deemed to constitute the satisfaction or waiver of the conditions set forth
in Section 3.1; provided, that any such deemed satisfaction or
waiver shall be solely for the purposes of Section 3.1 and shall not be
deemed or construed to constitute a waiver of any other provision of this
Agreement or of any provisions of any of the other Loan Documents, including,
without limitation, any undelivered items undertaking or agreement or other
post-closing agreement or undertaking entered into by Borrower and/or
Guarantor.


 


ARTICLE IV.

REPRESENTATIONS AND WARRANTIES


 


Section
4.1.                                   Representations and Warranties as to Borrower. 
Borrower represents and warrants that, as of the Closing Date:


 


(a)                                  Organization. 
Borrower (i) is a duly organized and validly existing limited liability
company in good standing under the laws of the State of Delaware, (ii) has the
requisite power and authority to own its properties (including, without limitation,
the Mortgaged Property) and to carry on its business as now being conducted and
is qualified to do business in the jurisdiction in which the Mortgaged Property
is located, and (iii) has the requisite power to execute and deliver, and
perform its obligations under, this Agreement, the Note and all of the other
Loan Documents to which it is a party.


 


57

















 


(b)                                 Authorization; No Conflict; Consents and
Approvals.  The execution and delivery by Borrower of this
Agreement, the Note and each of the other Loan Documents, Borrower’s
performance of its obligations hereunder and under the other Loan Documents and
the creation of the security interests and liens provided for in this Agreement
and the other Loan Documents to which it is a party (i) have been duly
authorized by all requisite action on the part of Borrower, (ii) will not
violate any provision of any Legal Requirements, any order of any court or
other Governmental Authority, the Organizational Agreement or any indenture or
agreement or other instrument to which Borrower is a party or by which Borrower
is bound, and (iii) will not be in conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under, or result
in the creation or imposition of any Lien of any nature whatsoever upon the
Mortgaged Property pursuant to, any such indenture or agreement or material
instrument other than the Loan Documents. 
Other than those obtained or filed on or prior to the Closing Date,
Borrower is not required to obtain any consent, approval or authorization from,
or to file any declaration or statement with, any Governmental Authority or
other agency in connection with or as a condition to the execution, delivery or
performance of this Agreement, the Note or the other Loan Documents executed
and delivered by Borrower.


 


(c)                                  Enforceability. 
This Agreement, the Note and each other Loan Document executed by
Borrower in connection with the Loan (including, without limitation, any Collateral
Security Instrument), is the legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms, subject to
bankruptcy, insolvency, and other limitations on creditors’ rights generally
and to equitable principles.  This
Agreement, the Note and such other Loan Documents are not subject to any right
of rescission, set-off, counterclaim or defense by Borrower (including the
defense of usury), and Borrower has not asserted any right of rescission,
set-off, counterclaim or defense with respect thereto.


 


(d)                                 Litigation.  There are no actions, suits
or proceedings at law or in equity by or before any Governmental Authority or
other agency now pending and served or, to the best knowledge of Borrower,
threatened against Borrower, Guarantor or any Collateral, which actions, suits
or proceedings, if determined against Borrower, Guarantor or such Collateral,
are reasonably likely to result in a Material Adverse Effect.


 


(e)                                  Agreements.  Borrower is not in default in
the performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any agreement or instrument to which it is
a party or by which Borrower or any Collateral is bound which default is
reasonably likely to have a Material Adverse Effect.  Neither Borrower nor Guarantor is a party to any agreement or
instrument or subject to any restriction which restricts such Person’s ability
to conduct its business in the ordinary course or that is reasonably likely to
have a Material Adverse Effect.


 


(f)                                    No Bankruptcy Filing. 
Neither Borrower nor Guarantor is contemplating either the filing of a
petition by it under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a material portion of its assets or property.  To the best knowledge of Borrower, no Person
is contemplating the filing of any such petition against Borrower.


 


(g)                                 Solvency.  Giving effect to the
transactions contemplated hereby, the fair market value of Borrower’s assets
exceeds and will, immediately following the making of the


 


58

















 


Loan, exceed Borrower’s total liabilities
(including, without limitation, subordinated, unliquidated, disputed and
contingent liabilities).  The fair
market value of Borrower’s assets is and will, immediately following the making
of the Loan, be greater than Borrower’s probable liabilities (including the
maximum amount of its contingent liabilities on its debts as such debts become
absolute and matured).  Borrower’s
assets do not and, immediately following the making of the Loan will not,
constitute unreasonably small capital to carry out its business as conducted or
as proposed to be conducted.  Borrower
does not intend to, and does not believe that it will, incur debts and
liabilities (including, without limitation, contingent liabilities and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Borrower).


 


(h)                                 Other Debt.  Borrower has not borrowed or
received other debt financing whether unsecured or secured by the Mortgaged
Property or any part thereof which is outstanding as of the Closing Date.  As of the Closing Date, Borrower has no
Other Borrowings other than trade debt expressly permitted under Article VIII
of this Agreement.


 


(i)                                     Full and Accurate Disclosure.  No
statement of fact made by or on behalf of Borrower in this Agreement or in any
of the other Loan Documents contains any untrue statement of material fact or
omits to state any material fact necessary to make statements contained herein
or therein not misleading.  To the best
knowledge of Borrower, no financial statements or any other document, certificate
or written statement furnished to Lender by Borrower or Guarantor, or by any
third party on behalf of Borrower or Guarantor, for use in connection with the
Loan contains any untrue representation, warranty or statement of a material
fact, and none omits or will omit to state a material fact necessary in order
to make the statements contained herein or therein not misleading.  To the best knowledge of Borrower, there is
no fact that has not been disclosed to Lender that is reasonably likely to
result in a Material Adverse Effect.


 


(j)                                     Financial Information.  All
financial statements and other data concerning Borrower, Guarantor and the
Mortgaged Property that has been delivered by or on behalf of Borrower or
Guarantor to Lender is true, complete and correct in all material respects and,
except as disclosed on Schedule 4 attached hereto, has been prepared in
accordance with GAAP.  Since the
delivery of such data, except as otherwise disclosed in writing to Lender,
there has been no change in the financial position of Borrower, Guarantor or
the Mortgaged Property, or in the results of operations of Borrower or
Guarantor, which change results or is reasonably likely to result in a Material
Adverse Effect.  Neither Borrower nor
Guarantor has incurred any obligation or liability, contingent or otherwise,
not reflected in such financial data, which is likely to have a Material
Adverse Effect upon its business operations or the Mortgaged Property.


 


(k)                                  Investment Company Act; Public Utility
Holding Company Act.  Borrower is not (i) an “investment company”
or a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended, (ii) a “holding company” or a
“subsidiary company” of a “holding company” or an “affiliate” of either a
“holding company” or a “subsidiary company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or (iii) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money in accordance with this Agreement.


 


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(l)                                     Compliance.  Borrower is in compliance
with all applicable Legal Requirements, except for noncompliance that is not
reasonably likely to have a Material Adverse Effect.  Borrower is not in default or violation of any order, writ,
injunction, decree or demand of any Governmental Authority except for defaults
or violations which are not reasonably likely to have a Material Adverse
Effect.


 


(m)                               Use of Proceeds; Margin Regulations. 
Borrower will use the proceeds of the Loan for the purposes described in
Section 2.2.  No part of the
proceeds of the Loan will be used for the purpose of purchasing or acquiring
any “margin stock” within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System or for any other purpose which would be
inconsistent with such Regulation U or any other Regulations of such Board of
Governors, or for any purposes prohibited by Legal Requirements.


 


(n)                                 Organizational Chart.  The
organizational chart set forth as Schedule 2 accurately sets forth the
direct and indirect ownership structure of Borrower.


 


(o)                                 No Defaults.  No Default or Event of
Default exists under or with respect to any Loan Document.


 


(p)                                 Plans and Welfare Plans.  The
assets of Borrower are not treated as “plan assets” under regulations currently
promulgated under ERISA.  Neither
Borrower nor any ERISA Affiliate sponsors, maintains, contributes to or is
required to contribute to any Plan or Multiemployer Plan nor has the Borrower
or any ERISA Affiliate sponsored, maintained, contributed to or been required
to contribute to any Plan or Multiemployer Plan within the past six years.  There are no pending issues or claims before
the Internal Revenue Service, the United States Department of Labor or any
court of competent jurisdiction related to any Plan or Welfare Plan.  No event has occurred, and there exists no
condition or set of circumstances, in connection with any Plan or Welfare Plan
under which Borrower or, to the best knowledge of Borrower, any ERISA
Affiliate, directly or indirectly (through an indemnification agreement or
otherwise), is reasonably likely to be subject to any material risk of
liability under Section 409 or 502(i) of ERISA or Section 4975 of the Code.  No Welfare Plan provides or will provide
benefits, including, without limitation, death or medical benefits (whether or
not insured) with respect to any current or former employee of Borrower, or, to
the best knowledge of Borrower, any ERISA Affiliate beyond his or her
retirement or other termination of service other than (i) coverage mandated by
applicable law, (ii) death or disability benefits that have been fully provided
for by fully paid up insurance or (iii) severance benefits.


 


(q)                                 Additional Borrower UCC Information. 
Borrower’s organizational identification number is 3723702 and the full
legal name of Borrower is as set forth on the signature pages hereof and
Borrower has not done in the last five (5) years, and does not do, business
under any other name (including any trade-name or fictitious business name).


 


(r)                                    Not Foreign Person. 
Borrower is not a “foreign person” within the meaning of § 1445(f)(3) of
the Code.


 


(s)                                  Labor Matters. 
Borrower is not a party to any collective bargaining agreements.


 


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(t)                                    Pre-Closing Date Activities. 
Borrower has not conducted any business or other activity on or prior to
the Closing Date, other than in connection with the acquisition, management and
ownership of the Mortgaged Property.


 


(u)                                 No Bankruptcies or Criminal Proceedings
Involving Borrower or Related Parties.  No bankruptcy, insolvency,
reorganization or comparable proceedings have ever been instituted by or
against Borrower, any Affiliate of Borrower, any Guarantor or any individual or
entity owning, with his, her or its family members, 20% or more of the direct,
or indirect beneficial ownership interests in Borrower (each such Guarantor,
individual, or entity being herein referred to as a “Principal”), and no such proceeding
is now pending or contemplated.  None of
Borrower, any Principal, or to Borrower’s knowledge, any other individual or
entity directly or indirectly owning or controlling, or the family members of
which own or control, any direct or indirect beneficial ownership interest in
Borrower or in the Manager or asset manager for the Mortgaged Property, have
been charged, indicted or convicted, or are currently under the threat of
charge, indictment or conviction, for any felony or crime punishable by imprisonment.


 


(v)                                 No Prohibited Persons. 
Neither Borrower, Member, Guarantor nor any of their respective
officers, directors, shareholders, partners, members or Affiliates (including
the indirect holders of equity interests in Borrower) is or will be an entity or
person: (i) that is listed in the Annex to, or is otherwise subject to the
provisions of Executive Order 13224 issued on September 24, 2001 (“EO13224”);
(ii) whose name appears on the United States Treasury Department’s Office of
Foreign Assets Control (“OFAC”) most current list of “Specifically
Designated National and Blocked Persons” (which list may be published from time
to time in various mediums including, but not limited to, the OFAC website,
http:www.treas.gov/ofac/t11sdn.pdf)(the “OFAC List”); (iii) who commits,
threatens to commit or supports “terrorism”, as that term is defined in EO
13224; or (iv) who is otherwise affiliated with any entity or person listed
above (any and all parties or persons described in clauses (i) through (iv)
above are herein referred to as a “Prohibited Person”).  To the best knowledge of the Borrower, no
tenant at the Property currently is identified on the OFAC List or otherwise
qualifies as a Prohibited Person and no tenant at the Property is owned by or
an Affiliate of a Prohibited Person. 
Borrower and Manager have implemented and will continue to follow
procedures to ensure that no tenant at the Property is a Prohibited Person or
owned by or an Affiliate of a Prohibited Person.


 


Section
4.2.                                   Representations and Warranties as to the
Mortgaged Property.  Borrower hereby represents and warrants to
Lender that, as to each Mortgaged Property and the Mortgages, as of the Closing
Date:


 


(a)                                  Title to the Mortgaged Property. 
Borrower owns good, marketable and insurable fee simple title to each
Mortgaged Property (other than Personalty), free and clear of all Liens, other
than the Permitted Encumbrances. 
Borrower owns the Personalty free and clear of any and all Liens, other
than Permitted Encumbrances.  There are
no outstanding options to purchase or rights of first refusal or restrictions
on transferability affecting any Mortgaged Property or any portion thereof or
interest therein.


 


(b)                                 Utilities and Public Access. 
Except as disclosed on Schedule 4, (i) each Mortgaged Property has
adequate rights of access to public ways and is served by public water,


 


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electric, sewer, sanitary sewer and storm drain
facilities; (ii) all public utilities necessary to the continued use and enjoyment
of each Mortgaged Property as presently used and enjoyed are located in the
public right-of-way abutting the premises, and all such utilities are connected
so as to serve each Mortgaged Property without passing over other property
except for land or easement areas of or available to the utility company
providing such utility service; and (iii) all roads necessary for the full
utilization of each Mortgaged Property for its current purpose have been
completed and dedicated to public use and accepted by all Governmental
Authorities or are the subject of access easements for the benefit of each
Mortgaged Property.


 


(c)                                  Condemnation.  No
Taking has been commenced or, to the best of Borrower’s knowledge, is
contemplated with respect to all or any portion of any Mortgaged Property or
for the relocation of roadways providing access to any Mortgaged Property.


 


(d)                                 Compliance.  Each Mortgaged Property and
the current use thereof is in compliance with all applicable Legal Requirements
(including, without limitation, building, parking, subdivision, land use,
health, fire, safety and zoning ordinances and codes) and all applicable
Insurance Requirements, except for noncompliance which cannot reasonably be
expected to result in a Material Adverse Effect.  Each Mortgaged Property is zoned for its current use, which
zoning designation is unconditional, in full force and effect, and is beyond
all applicable appeal periods.   In the
event that all or any part of the Improvements located on any Mortgaged
Property are destroyed or damaged, said Improvements can be legally
reconstructed to their condition prior to such damage or destruction, and
thereafter exist for the same use without violating any zoning or other
ordinances applicable thereto and without the necessity of obtaining any
variances or special permits, other than customary demolition, building and
other construction related permits.  No
legal proceedings are pending or, to the knowledge of Borrower, threatened with
respect to the zoning of the Mortgaged Property.  Neither the zoning nor any other right to construct, use or
operate the Mortgaged Property is in any way dependent upon or related to any
real estate other than the Mortgaged Property. 
No tract map, parcel map, condominium plan, condominium declaration, or
plat of subdivision will be recorded by Borrower with respect to the Mortgaged
Property without Lender’s prior written consent.


 


(e)                                  Environmental Compliance. 
Except for matters set forth in the Environmental Reports delivered to
Lender in connection with the Loan (true, correct and complete copies of which
have been provided to Lender by Borrower):


 


(i)                                     Borrower and each Mortgaged Property is in
full compliance with all applicable Environmental Laws (which compliance
includes, but is not limited to, the possession by Borrower or the Manager of
all environmental, health and safety permits, licenses and other governmental
authorizations required in connection with the ownership and operation of the
Mortgaged Property under all Environmental Laws), except for noncompliance
which cannot reasonably be expected to result in a Material Adverse Effect.


 


(ii)                                  There is no material Environmental Claim
pending or, to the actual knowledge of Borrower, threatened, and no penalties
arising under Environmental Laws have been assessed against Borrower, the
Manager or any Mortgaged Property, or, to the actual knowledge of Borrower,
against any Person whose liability for any Environmental


 


62

















 


Claim
Borrower or the Manager has or may have retained or assumed either
contractually or by operation of law, and no material investigation or review
is pending or, to the actual knowledge of Borrower, threatened by any
Governmental Authority, citizens group, employee or other Person with respect
to any alleged failure by Borrower or the Manager or any Mortgaged Property to
have any environmental, health or safety permit, license or other authorization
required under, or to otherwise comply with, any Environmental Law or with
respect to any alleged liability of Borrower or the Manager for any Use or
Release of any Hazardous Substances.


 


(iii)                               There are no present and, to the best knowledge of the Borrower, there
have been no past material Releases of any Hazardous Substances that are reasonably
likely to form the basis of any Environmental Claim against Borrower, the
Manager, any Mortgaged Property or against any Person whose liability for any
Environmental Claim Borrower or the Manager has or may have retained or assumed
either contractually or by operation of law (other than Hazardous Substances
being used in amounts that are customary for properties such as the Mortgaged
Property and for purposes that are typical for properties such as the Mortgaged
Property and in all cases are utilized in compliance with Environmental Law in
all material respects).


 


(iv)                              Without limiting the generality of the foregoing, to the best knowledge
of the Borrower, there is not present at, on, in or under any Mortgaged
Property, any Hazardous Substances (including, without limitation,
PCB-containing equipment, asbestos or asbestos containing materials,
underground storage tanks or surface impoundments for Hazardous Substances,
lead in drinking water or lead based paint) (other than Hazardous Substances being
used in amounts that are customary for properties such as the Mortgaged
Property and for purposes that are typical for properties such as the Mortgaged
Property and in all cases are utilized in compliance with Environmental Law in
all material respects) or any fungus, mold, mildew or biological agent the
presence of which is reasonably likely to materially adversely affect the value
or utility of such Mortgaged Property.


 


(v)                                 No liens are presently recorded with the
appropriate land records under or pursuant to any Environmental Law with
respect to the Mortgaged Property and no Governmental Authority has been taking
or, to the actual knowledge of Borrower, is in the process of taking any action
that could subject the Mortgaged Property to Liens under any Environmental Law.


 


(vi)                              There have been no environmental investigations, studies, audits,
reviews or other analyses conducted by or that are in the possession of
Borrower in relation to any Mortgaged Property which have not been made
available to Lender.


 


(f)                                    Mortgage and Other Liens. 
Each Mortgage creates a valid and enforceable first priority Lien on the
applicable Mortgaged Property described therein, as security for the repayment
of the Indebtedness, subject only to the Permitted Encumbrances applicable to
such Mortgaged Property.  This Agreement
creates a valid and enforceable first priority Lien on all Account
Collateral.  Each Collateral Security
Instrument establishes and creates a valid, subsisting and enforceable Lien on
and a security interest in, or claim to, the


 


63

















 


rights and property described therein.  All property covered by any Collateral
Security Instrument in which a security interest can be perfected by the filing
of a financing statement is subject to a UCC financing statement filed and/or
recorded, as appropriate (or irrevocably delivered to an agent for such
recordation or filing) in all places necessary to perfect a valid first
priority Lien with respect to the rights and property that are the subject of
such Collateral Security Instrument to the extent governed by the UCC.


 


(g)                                 Assessments.  There are no pending or, to
the best knowledge of Borrower, proposed special or other assessments for
public improvements or otherwise affecting any Mortgaged Property, nor are
there any contemplated improvements to any Mortgaged Property that may result
in such special or other assessments.


 


(h)                                 No Joint Assessment; Separate Lots. 
Borrower has not suffered, permitted or initiated the joint assessment
of the Mortgaged Property (i) with any other real property constituting a
separate tax lot, and (ii) with any portion of the Mortgaged Property which may
be deemed to constitute personal property, or any other procedure whereby the
lien of any taxes which may be levied against such personal property shall be
assessed or levied or charged to the Mortgaged Property as a single lien.  The Mortgaged Property is comprised of one
or more parcels, each of which constitutes a separate tax lot and none of which
constitutes a portion of any other tax lot.


 


(i)                                     No Prior Assignment. 
Lender is the collateral assignee of Borrower’s interest under the
Leases.  There are no prior assignments
of the Leases or any portion of the Rent due and payable or to become due and payable
which are presently outstanding.


 


(j)                                     Permits; Certificate of Occupancy. 
Borrower has obtained all Permits necessary to the use and operation of
each Mortgaged Property, except for noncompliance which cannot reasonably be
expected to result in a Material Adverse Effect.  The use being made of each Mortgaged Property is in conformity
with the certificate of occupancy and/or such Permits for such Mortgaged
Property and any other restrictions, covenants or conditions affecting such
Mortgaged Property, except for noncompliance which cannot reasonably be
expected to result in a Material Adverse Effect.


 


(k)                                  Flood Zone.  Except as shown on the
Survey, no Mortgaged Property or any portion thereof is located in a flood
hazard area as defined by the Federal Insurance Administration.


 


(l)                                     Physical Condition. 
Except as set forth in the Property Condition Assessment, to the best
knowledge of Borrower, each Mortgaged Property is free of structural defects
and all Improvements, including the building systems contained therein are in
good working order subject to ordinary wear and tear.


 


(m)                               Security Deposits. 
Borrower and the Manager are in compliance in all material respects with
all Legal Requirements relating to all security deposits with respect to each
Mortgaged Property.


 


(n)                                 Intellectual Property.  All
material Intellectual Property that Borrower owns or has pending, or under
which it is licensed, are in good standing and uncontested.  There


 


64

















 


is no right under any Intellectual Property
necessary to the business of Borrower as presently conducted or as Borrower
contemplates conducting its business. 
Borrower has not infringed, is not infringing, and has not received notice
of infringement with respect to asserted Intellectual Property of others.  There is no infringement by others of
material Intellectual Property of Borrower.


 


(o)                                 No Encroachments. 
Except as shown on the Survey, to the best knowledge of Borrower, (i)
all of the Improvements which were included in determining the appraised value
of each Mortgaged Property lie wholly within the boundaries and building
restriction lines of each Mortgaged Property, (ii) no improvements on adjoining
properties encroach upon any Mortgaged Property, (iii) no Improvements encroach
upon any easements or other encumbrances affecting the Mortgaged Property, and
(iv) all of the Improvements comply with all material requirements of any
applicable zoning and subdivision laws and ordinances.


 


(p)                                 Management Agreement.  The
Management Agreement is in full force and effect.  There is no default, breach or violation existing thereunder by
Borrower or, to the best knowledge of Borrower, any other party thereto and no
event (other than payments due but not yet delinquent) which, with the passage
of time or with notice and the expiration of any grace or cure period, would
constitute a default, breach or violation by Borrower or, to the best knowledge
of Borrower, any other party thereunder or entitle Borrower or, to the best knowledge
of Borrower, any other party thereto to terminate any such agreement.


 


(q)                                 Leases.  No Mortgaged Property is
subject to any Leases other than the Leases described in the rent rolls
delivered to Lender in connection with the making of the Loan.  No person has any possessory interest in any
Mortgaged Property or right to occupy the same except under and pursuant to the
provisions of the Leases.  The current
Leases are in full force and effect and, except as set forth on the rent rolls
delivered to Lender in connection with the making of the Loan, or as disclosed
on Schedule 4, there are no monetary or other material defaults
thereunder by either party and no conditions which with the passage of time
and/or notice would constitute monetary or other material defaults
thereunder.  Except as disclosed on Schedule
4, no portion of the Mortgaged Property is leased to or occupied by any
Affiliate of Borrower.  Except as
disclosed on Schedule 4, all Leases at each Mortgaged Property consist
solely of Leases of Homesites and related common areas, and not of other
portions of the Mortgaged Property. 
Except as disclosed on Schedule 4, Borrower does not own any
manufactured homes or mobile homes, whether or not located at the Mortgaged
Property.  No material termination
payments or fees are due in the event Borrower cancels or terminates any
commercial Leases to which it is a party.


 


Section
4.3.                                   Survival of Representations. 
Borrower agrees that (i) all of the representations and warranties of
Borrower set forth in Section 4.1 and 4.2 and in the other Loan
Documents delivered on the Closing Date are made as of the Closing Date, and
(ii) all representations and warranties made by Borrower shall survive the
delivery of the Note and making of the Loan and continue for so long as any
amount remains owing to Lender under this Agreement, the Note or any of the
other Loan Documents; provided, however, that the representations
set forth in Section 4.2(e) shall survive for five (5) years following
repayment of the Indebtedness.  All
representations, warranties, covenants and agreements made in this


 


65

















 


Agreement or in the other Loan Documents shall be
deemed to have been relied upon by Lender notwithstanding any investigation
heretofore or hereafter made by Lender or on Lender’s behalf.


 


ARTICLE V.

AFFIRMATIVE COVENANTS


 


Section
5.1.                                   Affirmative Covenants. 
Borrower covenants and agrees that, from the date hereof and until
payment in full of the Indebtedness:


 


(a)                                  Existence; Compliance with Legal
Requirements: Insurance.  Borrower shall do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
existence as a limited liability company, and any rights, licenses, Permits and
franchises necessary for the conduct of its business and will comply with all
Legal Requirements and Insurance Requirements applicable to it and to each
Mortgaged Property in all material respects. 
Borrower shall at all times maintain, preserve and protect all
franchises and trade names and preserve all the remainder of its property
necessary for the continued conduct of its business and keep the Mortgaged
Property in good repair, working order and condition, except for reasonable
wear and use (and except for casualty losses as to which other provisions
hereof shall govern), and from time to time make, or cause to be made, all
reasonably necessary repairs, renewals, replacements, betterments and
improvements thereto.


 


(b)                                 Basic Carrying Costs and Other Claims;
Contest.


 


(i)                                     Subject to Borrower’s contest rights set
forth in Section 5.1(b)(ii) below, Borrower will pay when due (A) all
Basic Carrying Costs with respect to Borrower and the Mortgaged Property; (B)
all claims (including claims for labor, services, materials and supplies) for
sums that have become due and payable and that by law have or may become a Lien
upon any of the Mortgaged Property or its other properties or assets
(hereinafter referred to as the “Lien Claims”); and (C) all federal,
state and local income taxes, sales taxes, excise taxes and all other taxes and
assessments of Borrower on its business, income or assets; in each instance
before any penalty or fine is incurred with respect thereto.  Borrower’s obligation to pay Basic Carrying
Costs pursuant to this Agreement shall include, to the extent permitted by
applicable law, Impositions resulting from future changes in law which impose
upon Lender an obligation to pay any property taxes on the Mortgaged Property
or other Impositions.


 


(ii)                                  Borrower shall not be required to pay,
discharge or remove any Imposition or Lien Claim so long as Borrower contests
in good faith such Imposition or Lien Claim or the validity, applicability or
amount thereof by an appropriate legal proceeding which operates to prevent the
collection of such amounts and the sale of the applicable Mortgaged Property or
any portion thereof, so long as:


 


(A)                              the Indebtedness shall not have been accelerated, if an Event of
Default shall have occurred and be continuing;


 


(B)                                prior to the date on which such Imposition or Lien Claim would
otherwise have become delinquent, Borrower shall have given Lender prior
written notice of its intent to contest said Imposition or Lien Claim deposited
with


 


66

















 


Lender
(or with a court of competent jurisdiction or other appropriate body approved
by Lender) such additional amounts as are necessary to keep on deposit at all
times, an amount equal to at least one hundred twenty five percent (125%) (or
such higher amount as may be required by applicable law) of the total of (x)
the balance of such Imposition or Lien Claim then remaining unpaid, and (y) all
interest, penalties, costs and charges accrued or accumulated thereon, together
with such other security as may be required in the proceeding, or as may be
required by Lender, to insure the payment of any such Imposition or Lien Claim
and all interest and penalties thereon; provided, that notwithstanding
the foregoing, with respect to Impositions or Lien Claims in an amount not in
excess of $100,000, Borrower shall not be required to deposit such amounts with
the Lender, so long as Borrower demonstrates to the reasonable satisfaction of
the Lender that Borrower has otherwise reserved such funds or such funds are
otherwise available to the Borrower;


 


(C)                                no risk of sale, forfeiture or loss of any interest in the Mortgaged
Property or any part thereof arises, in Lender’s judgment, during the pendency
of such contest;


 


(D)                               such contest does not, in Lender’s determination, have a Material
Adverse Effect;


 


(E)                                 such contest is based on bona fide, material, and reasonable claims
or defenses;


 


(F)                                 such proceeding shall be permitted under and
be conducted in accordance with the provisions of any other instrument to which
Borrower is subject and shall not constitute a default thereunder and such
proceeding shall be conducted in accordance with all applicable statutes, laws
and ordinances; and


 


(G)                                Borrower shall have obtained such endorsements to the Title Insurance
Policy with respect to such Imposition or Lien Claim as Lender may require (or
escrowed with a title insurance company funds sufficient to obtain such
endorsements pursuant to escrow arrangements reasonably satisfactory to
Lender).


 


Any such contest shall be prosecuted with due
diligence, and Borrower shall promptly pay the amount of such Imposition or
Lien Claim as finally determined, together with all interest and penalties
payable in connection therewith.  Lender
shall have full power and authority, but no obligation, to apply any amount
deposited with Lender under this subsection to the payment of any unpaid
Imposition or Lien Claim to prevent the sale or forfeiture of the Mortgaged
Property for non-payment thereof, if Lender reasonably believes that such sale
or forfeiture is threatened.  Any
surplus retained by Lender after payment of the Imposition or Lien Claim for
which a deposit was made shall be promptly repaid to Borrower unless an Event
of Default shall have occurred, in which case said surplus may be retained by
Lender to be applied as Lender, in its sole and absolute discretion, may elect.


 


67

















 


(c)                                  Litigation.  Borrower shall give prompt
written notice to Lender of any material litigation or governmental proceedings
pending or threatened (in writing) against Borrower, or the Mortgaged Property,
other than personal injury litigation which is covered by insurance, eviction
matters with respect to tenants or occupants (in which no counterclaims for
material damages or liabilities are made against Borrower), and matters related
to enforcement of building or zoning codes (as long as the Mortgaged Property
is in material compliance with such building and zoning codes).


 


(d)                                 Environmental Remediation.


 


(i)                                     If any investigation, site monitoring,
cleanup, removal, restoration or other remedial work of any kind or nature is
required pursuant to an order or directive of any Governmental Authority or
under any applicable Environmental Law, because of or in connection with the current
or future presence, suspected presence, Release or suspected Release of a
Hazardous Substance on, under or from any Mortgaged Property or any portion
thereof (collectively, the “Remedial Work”), Borrower shall promptly
commence and diligently prosecute to completion all such Remedial Work, and
shall conduct such Remedial Work in accordance with the National Contingency
Plan promulgated under the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”), if applicable,
and in accordance with other applicable Environmental Laws.  In all events, such Remedial Work shall be
commenced within such period of time as required under any applicable
Environmental Law.  If any fungus, mold,
mildew or other biological agent is present at any Mortgaged Property in a
manner or at a level that is reasonably likely to materially adversely affect
the value or utility of such Mortgaged Property or that poses a significant
health risk, the Borrower shall promptly commence and diligently prosecute to
completion the remediation of such condition to the reasonable satisfaction of
the Lender or its servicer.


 


(ii)                                  If requested by Lender, all Remedial Work
under clause (i) above shall be performed by contractors, and, if the
work is reasonably anticipated to cost in excess of $75,000, under the
supervision of a consulting Engineer, each approved in advance by Lender which
approval shall not be unreasonably withheld or delayed.  Borrower shall pay all costs and expenses
reasonably incurred in connection with such Remedial Work.  If Borrower does not timely commence and
diligently prosecute to completion the Remedial Work, Lender may (but shall not
be obligated to), upon 10 days prior written notice to Borrower of its
intention to do so, cause such Remedial Work to be performed.  Borrower shall pay or reimburse Lender on
demand for all expenses (including reasonable attorneys’ fees and
disbursements, but excluding internal overhead, administrative and similar
costs of Lender) reasonably relating to or incurred by Lender in connection
with monitoring, reviewing or performing any Remedial Work in accordance
herewith.


 


(iii)                               Borrower shall not commence any Remedial Work under clause (i)
above, nor enter into any settlement agreement, consent decree or other
compromise relating to any Hazardous Substances or Environmental Laws without
providing notice to Lender as provided in Section 5.1(f).  Notwithstanding the foregoing, if the
presence or threatened 


 


68

















 


presence
of Hazardous Substances on, under, about or emanating from the Mortgaged
Property poses an immediate threat to the health, safety or welfare of any
Person or the environment, or is of such a nature that an immediate response is
necessary or required under applicable Environmental Law, Borrower may complete
all necessary Remedial Work.  In such
events, Borrower shall notify Lender as soon as practicable and, in any event,
within three (3) Business Days, of any action taken.


 


(iv)                              In the event the Environmental Report recommends the development of an
operation and maintenance program for any recognized environmental condition at
a Mortgaged Property (including, without limitation, underground storage tanks
asbestos and asbestos containing materials, lead-based paints and lead in water
supplies) (“O & M Program”), Borrower shall develop an O & M
Program, as approved by Lender, in Lender’s sole discretion, and shall, during
the term of the Loan, comply in all respects with the terms and conditions of
the O & M Program.


 


(e)                                  Environmental Matters: Inspection.


 


(i)                                     Borrower shall not knowingly permit any
Hazardous Substances to be present on or under or to emanate from the Mortgaged
Property, or migrate from adjoining property onto or into the Mortgaged
Property, except under conditions permitted by applicable Environmental Laws
and, in the event that such Hazardous Substances are present on, under or
emanate from the Mortgaged Property, or migrate onto or into the Mortgaged
Property, Borrower shall cause the removal or remediation of such Hazardous
Substances, in accordance with this Agreement and as required by Environmental
Laws (including, where applicable, the National Contingency Plan promulgated
pursuant to the CERCLA), either on its own behalf or by causing a tenant or
other party legally responsible therefor to perform such removal and
remediation.  Borrower shall use
commercially reasonable efforts to prevent, and to seek the remediation of, any
migration of Hazardous Substances onto or into the Mortgaged Property from any
adjoining property.


 


(ii)                                  Upon reasonable prior written notice, Lender
shall have the right, except as otherwise provided under Leases, at all
reasonable times during normal business hours to enter upon and inspect environmental
conditions with respect to all or any portion of any Mortgaged Property, provided
that such inspections shall not unreasonably interfere with the operation or
the tenants, residents or occupants of any Mortgaged Property.  If Lender has reasonable grounds to suspect
that Remedial Work may be required, Lender shall notify Borrower and,
thereafter, may select a consulting Engineer to conduct and prepare reports of
such inspections (with notice to Borrower prior to the commencement of such
inspection).  Borrower shall be given a
reasonable opportunity to review any reports, data and other documents or
materials reviewed or prepared by the Engineer, and to submit comments and
suggested revisions or rebuttals to same. 
The inspection rights granted to Lender in this Section 5.1(e)
shall be in addition to, and not in limitation of, any other inspection rights
granted to Lender in this Agreement, and shall expressly include the right (if
Lender reasonably suspects that Remedial Work may be required) to conduct soil
borings, establish ground water monitoring wells and conduct other customary
environmental tests, assessments and audits.


 


69

















 


(iii)                               Borrower agrees to bear and shall pay or reimburse Lender on demand for
all sums advanced and reasonable expenses incurred (including reasonable
attorneys’ fees and disbursements, but excluding internal overhead,
administrative and similar costs of Lender) reasonably relating to, or incurred
by Lender in connection with, the inspections and reports described in this Section
5.1(e) (to the extent such inspections and reports relate to any Mortgaged
Property) in the following situations:


 


(x)                                   If Lender has reasonable grounds to believe,
at the time any such inspection is ordered, that there exists an occurrence or
condition that could lead to a material Environmental Claim;


 


(y)                                 If any such inspection reveals an occurrence
or condition that is reasonably likely to lead to a material Environmental
Claim with respect to such Mortgaged Property; or


 


(z)                                   If an Event of Default with respect to such
Mortgaged Property exists at the time any such inspection is ordered, and such
Event of Default relates to any representation, covenant or other obligation
pertaining to Hazardous Substances, Environmental Laws or any other
environmental matter.


 


(f)                                    Environmental Notices. 
Borrower shall promptly provide notice to Lender of:


 


(i)                                     a material Environmental Claim asserted by
any Governmental Authority with respect to any Hazardous Substance on, in,
under or emanating from any Mortgaged Property;


 


(ii)                                  any proceeding, investigation or inquiry
commenced or threatened in writing by any Governmental Authority, against
Borrower, any Affiliate of Borrower or with respect to any Mortgaged Property
concerning the presence, suspected presence, Release or threatened Release of
Hazardous Substances from or onto, in or under any property not owned by
Borrower (including, without limitation, proceedings under the CERCLA;


 


(iii)                               a material Environmental Claims asserted or threatened against
Borrower, against any other party occupying any Mortgaged Property or any
portion thereof which become known to Borrower or against any Mortgaged
Property;


 


(iv)                              the discovery by Borrower of a material occurrence or condition giving
rise to an obligation of the Borrower to the Lender hereunder on any Mortgaged
Property or on any real property adjoining or in the vicinity of any Mortgaged
Property;


 


(v)                                 the commencement or completion of any
Remedial Work; and


 


(vi)                              any of the foregoing clauses (i) - (v) as to which a tenant notifies
Borrower under a Lease with respect to such tenant.


 


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(g)                                 Copies of Notices. 
Borrower shall transmit to Lender copies of any citations, orders,
notices or other written communications received from any Person and any
notices, reports or other written communications submitted to any Governmental
Authority with respect to the matters described in Section 5.1(f).


 


(h)                                 Environmental Claims.  Lender
may join and participate in, as a party if Lender so determines, any legal or
administrative proceeding or action concerning the Mortgaged Property or any
portion thereof under any Environmental Law, if, in Lender’s reasonable
judgment, the interests of Lender shall not be adequately protected by
Borrower; provided, however, that Lender shall not participate in
day-to-day decision making with respect to environmental compliance.  Borrower shall pay or reimburse Lender on
demand for all reasonable sums advanced and reasonable expenses incurred
(including reasonable attorneys’ fees and disbursements, but excluding internal
overhead, administrative and similar costs of Lender) by Lender in connection
with any such action or proceeding.


 


(i)                                     Environmental Indemnification. 
Borrower shall indemnify, reimburse, defend, and hold harmless Lender,
and each of its respective parents, subsidiaries, Affiliates, shareholders,
directors, officers, employees, representatives, agents, successors, assigns
and attorneys (collectively, the “Indemnified Parties”) for, from, and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses (including, without limitation,
interest, penalties, reasonable attorneys’ fees, disbursements and expenses,
and reasonable consultants’ fees, disbursements and expenses (but excluding
internal overhead, administrative, lost opportunity and similar costs of
Lender)), asserted against, resulting to, imposed on, or incurred by any Indemnified
Party, directly or indirectly, in connection with any of the following (except
to the extent same are directly and solely caused by the gross negligence or
willful misconduct of any Indemnified Party):


 


(i)                                     events, circumstances, or conditions which
form the reasonable basis for an Environmental Claim;


 


(ii)                                  any pollution or threat to human health or
the environment that is related in any way to Borrower’s or any previous
owner’s or operator’s management, use, control, ownership or operation of any
Mortgaged Property (including, without limitation, all on-site and off-site
activities involving Hazardous Substances), and whether occurring, existing or
arising prior to or from and after the date hereof, and whether or not the
pollution or threat to human health or the environment is described in the
Environmental Reports;


 


(iii)                               any Environmental Claim against any Person whose liability for such
Environmental Claim Borrower has or may have assumed or retained either
contractually or by operation of law; or


 


(iv)                              the breach of any representation, warranty or covenant set forth in Section
4.2(e) and Sections 5.1(d) through 5.1(i), inclusive.


 


The
provisions of and undertakings and indemnification set forth in this Section
5.1(i) shall survive the satisfaction and payment of the Indebtedness and
termination of this Agreement.


 


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(j)                                     General Indemnity.


 


(i)                                     Borrower shall, at its sole cost and expense,
protect, defend, indemnify, release and hold harmless the Indemnified Parties
for, from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), administrative and judicial actions
and proceedings, obligations, debts, damages, losses, costs, expenses, fines,
penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, and litigation costs, of whatever kind or nature and whether or not
incurred in connection with any judicial or administrative proceedings
(including, but not limited to, reasonable attorneys’ fees and other reasonable
costs of defense) (the “Losses”) imposed upon or incurred by or asserted
against any Indemnified Parties (except as to any Indemnified Party to the
extent same are directly and solely caused by the gross negligence or willful
misconduct of such Indemnified Party) and directly or indirectly arising out of
or in any way relating to any one or more of the following:


 


(A)                              ownership of the Note or any of the other Loan Documents or otherwise
related to the Mortgaged Property or any interest therein or receipt of any
Rents or Accounts;


 


(B)                                any untrue statement of any material fact contained in any information
concerning Borrower, the Mortgaged Property or the Loan or the omission to
state therein a material fact required to be stated in such information or
necessary in order to make the statements in such information or in light of
the circumstances under which they were made not misleading;


 


(C)                                any and all lawful action that may be taken and is taken by the Lender
in connection with the enforcement of the provisions of this Agreement, the
Note or any of the other Loan Documents, whether or not suit is filed in
connection with same, or in connection with Borrower or any Affiliate of
Borrower becoming a party to a voluntary or involuntary federal or state
bankruptcy, insolvency or similar proceeding;


 


(D)                               any accident, injury to or death of persons or loss of or damage to
property occurring in, on or about any Mortgaged Property or any part thereof
or on the adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways;


 


(E)                                 any use, nonuse or condition in, on or about
the Mortgaged Property or any part thereof or on the adjoining sidewalks,
curbs, adjacent property or adjacent parking areas, streets or ways;


 


(F)                                 any failure on the part of Borrower to
perform or be in compliance with any of the terms of this Agreement or any of
the other Loan Documents;


 


(G)                                performance of any labor or services or the furnishing of any materials
or other property in respect of the Mortgaged Property or any part thereof
pursuant to provisions of this Agreement;


 


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(H)                               the failure of Borrower to file timely with the Internal Revenue
Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real
Estate, Broker and Barter Exchange Transactions, which may be required in
connection with this Agreement;


 


(I)                                    any failure of the Mortgaged Property to be
in compliance with any Legal Requirement;


 


(J)                                   the enforcement by any Indemnified Party of
the provisions of this Section 5.1(j); and


 


(K)                               any and all claims and demands whatsoever which may be asserted against
Lender by reason of any alleged obligations or undertakings on its part to
perform or discharge any of the terms, covenants, or agreements contained in
any Lease.


 


Any
amounts payable to an Indemnified Party by reason of the application of this Section
5.1(j)(i) shall become due and payable ten (10) days after written demand
and shall bear interest at the Default Rate from the tenth (10th) day after
demand until paid.


 


(ii)                                  Borrower shall, at its sole cost and expense,
protect, defend, indemnify, release and hold harmless the Indemnified Parties
from and against any and all Losses imposed upon or incurred by or asserted
against any of the Indemnified Parties and directly or indirectly arising out
of or in any way relating to any tax on the making and/or recording of this
Agreement, the Note or any of the other Loan Documents.


 


(iii)                               Borrower shall, at its sole cost and expense, protect, defend,
indemnify, release and hold harmless the Indemnified Parties from and against
any and all Losses (including, without limitation, reasonable attorneys’ fees
and costs) that the Indemnified Parties may incur, directly or indirectly, as a
result of a default under Borrower’s covenants with respect to ERISA and
employee benefits plans contained herein, including, without limitation, any
costs or expenses incurred in the investigation, defense, and settlement of
Losses incurred in correcting any prohibited transaction or in the sale of a
prohibited loan, and in obtaining any individual prohibited transaction
exemption under ERISA that may be required, in the Lender’s reasonable
discretion).


 


(iv)                              Promptly after receipt by an Indemnified Party under this Section
5.1(j) of notice of the making of any claim or the commencement of any
action, such Indemnified Party shall, if a claim in respect thereof is to be
made by such Indemnified Party against Borrower under this Section 5.1(j),
notify Borrower in writing, but the omission so to notify Borrower will not
relieve Borrower from any liability which it may have to any Indemnified Party
under this Section 5.1(j) or otherwise. 
In case any such claim is made or action is brought against any
Indemnified Party and such Indemnified Party seeks or intends to seek indemnity
from Borrower, Borrower will be entitled to participate in, and, to the extent
that it may wish, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party; and, upon receipt of notice from
Borrower to such Indemnified Party of its election so to assume the defense of
such claim or action and


 


73

















 


only
upon approval by the Indemnified Party of such counsel (such approval not to be
unreasonably withheld or delayed), Borrower will not be liable to such
Indemnified Party under this Section 5.1(j) for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof.  Notwithstanding the
preceding sentence, each Indemnified Party will be entitled to employ counsel
separate from such counsel for Borrower and from any other party in such action
if such Indemnified Party reasonably determines that a conflict of interest
exists which makes representation by counsel chosen by Borrower not
advisable.  In such event, Borrower
shall pay the reasonable fees and disbursements of such separate counsel.  Borrower shall not, without the prior
written consent of an Indemnified Party, which consent shall not be
unreasonably withheld or delayed, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit
or proceeding in respect of which indemnification may be sought hereunder
(whether or not such Indemnified Party is an actual or potential party to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each Indemnified Party from all liability arising out
of such claim, action, suit or proceeding. 
Each Indemnified Party shall not enter into a settlement of or consent
to the entry of any judgment with respect to any action, claim, suit or
proceeding as to which an Indemnified Party would be entitled to indemnification
hereunder without the prior written consent of Borrower, which consent shall
not be unreasonably withheld or delayed.


 


The
provisions of and undertakings and indemnification set forth in this Section
5.1(j) shall survive the satisfaction and payment of the Indebtedness and
termination of this Agreement.


 


(k)                                  Access to Mortgaged Property. 
Borrower shall permit agents, representatives and employees of Lender to
inspect each Mortgaged Property or any part thereof at such reasonable times as
may be requested by Lender upon reasonable advance written notice (except
during an Event of Default), subject, however, to the rights of Borrower and of
the tenants of the Mortgaged Property.


 


(l)                                     Notice of Default. 
Borrower shall promptly advise Lender in writing of any change in
Borrower’s condition, financial or otherwise, that is reasonably likely to have
a Material Adverse Effect, or of the occurrence of any Default or Event of
Default.


 


(m)                               Cooperate in Legal Proceedings. 
Except with respect to any claim by Borrower, the Member or the
Guarantor against Lender, Borrower shall reasonably cooperate with Lender with
respect to any proceedings before any Governmental Authority that are
reasonably likely to in any way materially affect the rights of Lender hereunder
or any rights obtained by Lender under any of the Loan Documents and, in
connection therewith, shall not prohibit Lender, at its election, from
participating in any such proceedings.


 


(n)                                 Perform Loan Documents. 
Borrower shall observe, perform and satisfy all the terms, provisions,
covenants and conditions required to be observed, performed or satisfied by it,
and shall pay when due all costs, fees and expenses required to be paid by it,
under the Loan Documents.


 


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(o)                                 Insurance Benefits. 
Borrower shall reasonably cooperate with Lender in obtaining for Lender
the benefits of any Insurance Proceeds lawfully or equitably payable to
Borrower or Lender in connection with any Mortgaged Property.  Lender shall be reimbursed for any expenses
reasonably incurred in connection therewith (including reasonable attorneys’
fees and disbursements, but excluding internal overhead, administrative and
similar costs of Lender) out of such Insurance Proceeds, all as more
specifically provided in this Agreement.


 


(p)                                 Further Assurances. 
Borrower shall, at Borrower’s sole cost and expense:


 


(i)                                     upon Lender’s reasonable request therefor
given from time to time, pay for (a) reports of UCC, tax lien, judgment and
litigation searches with respect to Borrower, and (b) searches of title to the
Mortgaged Property, each such search to be conducted by search firms designated
by Lender in each of the locations designated by Lender;


 


(ii)                                  furnish to Lender all instruments, documents,
certificates, title and other insurance reports and agreements, and each and
every other document, certificate, agreement and instrument required to be
furnished pursuant to the terms of the Loan Documents;


 


(iii)                               execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts necessary,
to evidence, preserve and/or protect the Collateral at any time securing or
intended to secure the Note, as Lender may reasonably require (including,
without limitation, tenant estoppel certificates, an amended or replacement
Mortgages, UCC financing statements or Collateral Security Instruments); and


 


(iv)                              do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective carrying out of
the intents and purposes of this Agreement and the other Loan Documents, as
Lender shall reasonably require from time to time.


 


(q)                                 Management of Mortgaged Property.


 


(i)                                     Each Mortgaged Property shall be managed at
all times by the current Manager or another manager reasonably satisfactory to
Lender, pursuant to a Management Agreement. 
Any such Manager may be an Affiliate of Borrower, provided that:  (a) the terms and conditions of such
Manager’s engagement are at arm’s length, reasonable, competitive and customary
in the applicable marketplace; and (b) Lender has approved such Manager and
such terms, which approval shall not be unreasonably withheld or delayed.  The Management Agreement, dated as of the
date hereof, between the Borrower and the Manager is deemed approved by Lender
in all respects.  Borrower shall cause
the Manager of the Mortgaged Property to agree that such Manager’s Management
Agreement is subject and subordinate in all respects to the Indebtedness and to
the Lien of the Mortgages.  A Management
Agreement may be terminated or assigned by the Manager (1) by Borrower at any
time in accordance with the provisions of such Management Agreement so long as
a successor or assignee Manager as specified below shall have been appointed
and approved and such successor Manager has (i) entered into


 


75

















 


(or
assumed) a Management Agreement in form and substance approved by Lender, which
approval shall not be unreasonably denied, conditioned or delayed, and (ii) has
executed and delivered a Manager’s Subordination to Lender, and (2) by Lender
upon thirty (30) days’ prior written notice to Borrower and the Manager (a)
upon the occurrence and continuation of an Event of Default or (b) if the
Manager commits any act which would permit termination under the Management
Agreement (subject to any applicable notice, grace and cure periods provided in
the Management Agreement) or (c) if a change of majority control occurs with
respect to the Manager.  Notwithstanding
the foregoing, any successor manager selected hereunder by Lender or Borrower
to manage the Mortgaged Property shall be a reputable management company having
substantial experience in the management of real property of a similar type,
size and quality in the state in which the Mortgaged Property is located.  Borrower may from time to time appoint a
successor manager to manage the Mortgaged Property with Lender’s prior written
consent, such consent not to be unreasonably withheld.  Borrower acknowledges and agrees that any
consent or approval requested of Lender under this Section may be conditioned
by Lender, at Lender’s discretion, upon Borrower first obtaining a Rating
Confirmation with respect to such change in management, and Lender shall not be
deemed to be acting unreasonably in requiring such a Rating Confirmation.  Borrower further covenants and agrees that
any manager of Mortgaged Property shall at all times while any Indebtedness is
outstanding maintain worker’s compensation insurance as required by
Governmental Authorities.


 


(ii)                                  Borrower further covenants and agrees that
each Mortgaged Property shall be operated pursuant to the Management Agreement
and that Borrower shall:  (w) promptly
perform and/or observe all of the material covenants and agreements required to
be performed and observed by it under the Management Agreement and do all
things reasonably necessary to preserve and to keep unimpaired its material
rights thereunder; (x) promptly notify Lender of any material default under the
Management Agreement of which it is aware; (y) promptly deliver to Lender a
copy of each financial statement, business plan, capital expenditures plan,
notice and report received by it under the Management Agreement, including, but
not limited to, financial statements; and (z) promptly enforce the performance
and observance of the covenants and agreements required to be performed and/or
observed by the Manager under the Management Agreement.


 


(r)                                    Financial Reporting.


 


(i)                                     Borrower shall keep and maintain or shall
cause to be kept and maintained on a Fiscal Year basis in accordance with GAAP
consistently applied, books, records and accounts reflecting in reasonable
detail all of the financial affairs of Borrower and all items of income and
expense in connection with the operation of the Mortgaged Property and
ownership of the Mortgaged Property and in connection with any services,
equipment or furnishings provided in connection with the operation of the
Mortgaged Property, whether such income or expense may be realized by Borrower
or by any other Person whatsoever. 
Lender shall have the right from time to time at all times during normal
business hours upon reasonable prior written notice to Borrower to examine such
books, records and accounts at the office of Borrower or other Person
maintaining such


 


76

















 


books,
records and accounts and to make such copies or extracts thereof as Lender
shall desire.  During the continuation
of an Event of Default (including, without limitation, an Event of Default
resulting from the failure of Borrower to deliver any of the financial
information required to be delivered pursuant to this Section 5.1(r)),
Borrower shall pay any reasonable costs and expenses incurred by Lender to
examine Borrower’s accounting records, as Lender shall reasonably determine to
be necessary or appropriate in the protection of Lender’s interest.


 


(ii)                                  Borrower shall furnish to Lender annually,
within ninety (90) days following the end of each Fiscal Year, a complete copy
of Borrower’s and Guarantor’s financial statements, each audited by a “Big
Four” accounting firm or such other Independent certified public accountant
acceptable to Lender in accordance with GAAP consistently applied covering
Borrower’s and Guarantor’s respective financial position and results of
operations, for such Fiscal Year and containing a statement of revenues and
expenses, a statement of assets and liabilities and a statement of Borrower’s
or Guarantor’s (as applicable) equity, all of which shall be in form and
substance reasonably acceptable to Lender. 
Any audit requirements of the Borrower pursuant to this Agreement may be
satisfied by delivery of the audited consolidated financial statements of the
Guarantor, provided that such financial statements of the Guarantor contain (i)
a separate income and expense statement for the Borrower and (ii) a separate
balance sheet, including a statement of Borrower’s equity.  Lender shall have the right from time to time
to review and consult with respect to the auditing procedures used in the
preparation of such annual financial statements.  Together with Borrower’s and Guarantors’ annual financial
statements, Borrower shall furnish, and cause Guarantor to furnish, to Lender
an Officer’s Certificate certifying as of the date thereof (x) that the annual
financial statements present fairly in all material respects the results of
operations and financial condition of Borrower or Guarantor, as applicable, all
in accordance with GAAP consistently applied, and (y) whether there exists an
Event of Default or Default, and if such Event of Default or Default exists,
the nature thereof, the period of time it has existed and the action then being
taken to remedy same.


 


(iii)                               Borrower shall furnish to Lender, within forty-five (45) days following
the end of each Fiscal Year quarter true, complete and correct quarterly
unaudited financial statements (including statements of cash flow) prepared in
accordance with GAAP with respect to Borrower and Guarantor for the portion of
the Fiscal Year then ended.


 


(iv)                              No later than thirty (30) days following the end of each of the months
of December, March, June, and September, beginning with the month ending at
March 31, 2004, Borrower shall prepare and deliver to Lender and its servicer a
statement (each a “Quarterly Statement”) in substantially the form of Schedule
8 hereto, setting forth with respect to the Mortgaged Property,


 


(A)                              a rent roll dated as of the last day of such quarter identifying the
name of each tenant and the associated Homesite, security deposit, amount due
at the beginning of the month, charges in the current month (including Homesite
rent, water/sewer, gas/electric, trash, mobile home rent, notes amount and
other charges), payments made during the month, amount due at the end of the
month,


 


77

















 


total
Homesites at the Mortgaged Property and total occupied Homesites at the
Mortgaged Property, with the occupancy level expressed as a percentage;


 


(B)                                quarterly and year-to-date operating statements, each of which shall
include an itemization of budgeted and actual (not pro forma) capital
expenditures during the applicable period, and which shall be prepared for each
individual Mortgaged Property and, on a consolidated basis, for all the
Mortgaged Property; and


 


(C)                                a quarterly and year-to-date comparison of the budgeted income and
expenses with the actual income and expenses for such quarter and year to date,
together with if requested by Lender, a detailed explanation of any variances
between budgeted and actual amounts that are in excess of five percent (5%) for
each line item therein.


 


(v)                                 Within thirty (30) days after the end of each
calendar month (and as to rent rolls requested by Lender on an interim basis,
within thirty (30) days after Lender’s request therefor), Borrower shall
provide to Lender and its servicer a statement (each a “Monthly Statement”)
in substantially the form of Schedule 9 hereto, setting forth with
respect to the Mortgaged Property


 


(A)                              a certified rent roll, for each individual Mortgaged Property
containing the information referred to in Section 5.1(r)(iv)(A),


 


(B)                                a certification of all prepaid Rent that has been collected for each
individual Mortgaged Property more than one (1) month in advance of its due
date,


 


(C)                                monthly operating financial statements for the last twelve (12) months,
including a comparison on a year-to-date basis to budget and prior year, for
each individual Mortgaged Property and, on a consolidated basis, for Borrower,
and


 


(D)                               a monthly occupancy report which includes data quantifying the total
number of Homesites, beginning occupancy, monthly move-in and move-out data for
residents, rentals and change of occupancy, ending monthly occupancy, ending
monthly occupancy percentage, budgeted occupancy percentage, total rentals,
rentals as a percentage of Homesites, total occupied rentals, rental occupancy
percentage, total repossessions and repossessions as a percentage of total
Homesites.


 


(vi)                              Borrower shall furnish to Lender, within fifteen (15) Business Days
after request, such further information with respect to the operation of the
Mortgaged Property and the financial affairs of Borrower as may be reasonably
requested by Lender, including all business plans prepared for Borrower.


 


(vii)                           Borrower shall furnish to Lender, within fifteen (15) Business Days
after request, such further information regarding any Plan or Multiemployer
Plan and any


 


78

















 


reports
or other information required to be filed under ERISA as may be reasonably
requested by Lender in writing.


 


(viii)                        At least thirty (30) days prior to the end of each of Borrower’s Fiscal
Years, Borrower shall submit or cause to be submitted to Lender for its
approval, such approval not to be unreasonably withheld or delayed, an
Operating Budget for Property Expenses, Capital Improvement Costs, Leasing
Commissions, and replacement reserve costs for the next Fiscal Year for the
Mortgaged Property.  Such Operating
Budget may allow for a ten percent (10%) line item variance.  Until so approved by Lender for the
subsequent Fiscal Year in accordance with the procedure set forth in Section
5.1(r)(ix) below, the Operating Budget approved by Lender for the preceding
Fiscal Year shall remain in effect for purposes of Section 2.12; provided,
that for so long as such prior Operating Budget remains in effect, amounts set
forth in the prior Operating Budget with respect to Property Expenses shall be
deemed increased with respect to actual increases in Basic Carrying Costs and
non-discretionary utility expenditures and shall be deemed increased by three
percent (3%) with regard to discretionary items.  Promptly following the occurrence and during the continuance of
an Event of Default, the Borrower shall submit or cause to be submitted to
Lender a Working Capital Budget for the remainder of the Fiscal Year during
which such Event of Default occurs and by not later than the end of each of
Borrower’s Fiscal Years with respect to the subsequent Fiscal Year.


 


(ix)                                Borrower shall submit any proposed Operating Budget in writing sent by
recognized overnight delivery service or by registered or certified mail (and
simultaneously shall contact the Lender by telephone and by electronic mail) in
accordance with the terms of this Agreement (the “First Notice”),
requesting Lender’s approval of such Operating Budget.  Lender shall use reasonable efforts to
deliver to Borrower its written approval or disapproval of the proposed Operating
Budget within ten (10) Business Days after Lender shall have received the First
Notice.  Unless Lender shall have
approved the Operating Budget contained in the First Notice, Lender’s approval
shall be deemed to be withheld.  If
Borrower does not receive Lender’s response at the end of such ten (10)
Business Days period, Borrower may resubmit its written request to Lender (the
“Second Notice”).  The Second Notice
shall make reference to the First Notice and shall bear the following legend in
capital letters:


 


“LENDER’S
FAILURE TO RESPOND TO THIS REQUEST FOR APPROVAL WITHIN TEN (10) BUSINESS DAYS
FOLLOWING RECEIPT SHALL BE DEEMED TO CONSTITUTE LENDER’S CONSENT TO THE
OPERATING BUDGET DESCRIBED HEREIN.”


 


If
Lender does not approve or disapprove the proposed Operating Budget within ten
(10) Business Days after Lender shall have received Borrower’s Second Notice,
Lender shall be deemed to have approved the proposed Operating Budget.


 


(x)                                   Together with the financial statements, rent
rolls, operating statements and other documents and information provided to
Lender by or on behalf of Borrower under this Section, Borrower also shall
deliver to Lender a certification in form and substance


 


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reasonably
satisfactory to Lender, executed on behalf of Borrower by its chief executive
officer or chief financial officer (or by the individual Guarantor if the
Guarantor is an individual) stating that, to such officer’s or individual’s
knowledge, such financial statements, rent rolls, operating statements and
other documents and information are true and complete in all material respects.


 


(xi)                                For purposes of this Section 5.1(r), all of the financial
reporting requirements may be satisfied by the Borrower posting the required
deliveries on a secure website reasonably satisfactory to the Lender and
sending to the Lender and its servicer each month an electronic mail
communication notifying the Lender and its servicer of the linkage to such
website; provided that notwithstanding the foregoing, in the event the Lender
includes the Loan in a Secondary Market Transaction in which Securities are
issued or otherwise changes the identity of its servicer to a Person other than
the initial servicer identified to the Borrower as of the Closing Date, then
the Lender may require that such deliveries be made to Lender and its servicer
in hard copy and on diskette or through electronic mail (including Microsoft
Excel format), in form and substance reasonably acceptable to Lender.


 


(s)                                  Operation of Mortgaged Property. 
Borrower shall cause the operation of each Mortgaged Property to be
conducted at all times in a manner consistent with at least the level of
operation of such Mortgaged Property as of the Closing Date, including, without
limitation, the following:


 


(i)                                     to maintain or cause to be maintained the
standard of each Mortgaged Property at all times at a level not lower than that
maintained by prudent managers of similar facilities or land in the region
where the Mortgaged Property is located;


 


(ii)                                  to operate or cause to be operated each
Mortgaged Property in a prudent manner in compliance in all material respects
with applicable Legal Requirements and Insurance Requirements relating thereto
and maintain or cause to be maintained all material licenses, Permits and any
other agreements necessary for the continued use and operation of each
Mortgaged Property; and


 


(iii)                               to maintain or cause to be maintained sufficient Inventory and
Equipment of types and quantities at each Mortgaged Property to enable Borrower
to operate each Mortgaged Property and to comply in all material respects with
all Leases affecting each Mortgaged Property.


 


(t)                                    Material Agreements. 
Except for Leases and any Management Agreement complying with the Loan
Documents, Borrower shall not enter into or become obligated under any material
agreement pertaining to the Mortgaged Property, including without limitation
brokerage agreements, unless the same may be terminated without cause and
without payment of a penalty or premium, on not more than thirty (30) days’
prior written notice.  Borrower will (A)
comply with the requirements of all present and future applicable laws, rules,
regulations and orders of any governmental authority in all jurisdictions in
which it is now doing business or may hereafter be doing business, (B) maintain
all material licenses and permits now held or hereafter acquired by Borrower,
and (C) perform, observe, comply and fulfill all of its obligations,


 


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covenants and conditions contained in any material
agreement pertaining to the Mortgaged Property.


 


(u)                                 ERISA.  Borrower shall deliver to
Lender as soon as possible, and in any event within ten days after Borrower
knows or has reason to believe that any of the events or conditions specified
below with respect to any Plan or Multiemployer Plan has occurred or exists, an
Officer’s Certificate setting forth details respecting such event or condition
and the action, if any, that Borrower or its ERISA Affiliate proposes to take
with respect thereto (and a copy of any report or notice required to be filed
with or given to PBGC by Borrower or an ERISA Affiliate with respect to such
event or condition):


 


(i)                                     any reportable event, as defined in Section
4043(b) of ERISA and the regulations issued thereunder, with respect to a Plan,
as to which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within thirty (30) days of the occurrence
of such event (provided that a failure to meet the minimum funding standard of
Section 412 of the Code or Section 302 of ERISA, including, without limitation,
the failure to make on or before its due date a required installment under
Section 412(m) of the Code or Section 302(e) of ERISA, shall be a reportable
event regardless of the issuance of any waivers in accordance with Section
412(d) of the Code); and any request for a waiver under Section 412(d) of the
Code for any Plan;


 


(ii)                                  the distribution under Section 4041(c) of
ERISA of a notice of intent to terminate any Plan or any action taken by
Borrower or an ERISA Affiliate to terminate any Plan;


 


(iii)                               the institution by PBGC of proceedings under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan, or
the receipt by Borrower or any ERISA Affiliate of Borrower of a notice from a
Multiemployer Plan that such action has been taken by PBGC with respect to such
Multiemployer Plan;


 


(iv)                              the complete or partial withdrawal from a Multiemployer Plan by
Borrower or any ERISA Affiliate of Borrower that results in material liability
under Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt by
Borrower or any ERISA Affiliate of Borrower of notice from a Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under Section 4041A of
ERISA;


 


(v)                                 the institution of a proceeding by a
fiduciary of any Multiemployer Plan against Borrower or any ERISA Affiliate of
Borrower to enforce Section 515 of ERISA, which proceeding is not dismissed
within thirty (30) days;


 


(vi)                              the adoption of an amendment to any Plan that, pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of
tax-exempt status of the trust of which such Plan is a part if Borrower or an
ERISA Affiliate of


 


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Borrower
fails to timely provide security to the Plan in accordance with the provisions
of said Sections; and


 


(vii)                           the imposition of a lien or a security interest in connection with a
Plan.


 


(v)                                 Intentionally Omitted.


 


(w)                               Secondary Market Transaction. 
Borrower acknowledges that Lender and its successors and assigns may (i)
sell the Loan to one or more investors as a whole loan, (ii) participate the
Loan to one or more investors, (iii) deposit the Loan with a trust, which trust
may sell certificates to investors evidencing an ownership interest in the
trust assets, or (iv) otherwise sell the Loan or interests therein to investors
(the transactions referred to in clauses (i) through (iv) above
are hereinafter each referred to as a “Secondary Market Transaction”).  Borrower shall cooperate with Lender in
attempting to effect or effecting any such Secondary Market Transaction and
shall cooperate in attempting to implement or implementing all requirements
imposed by any Rating Agency involved in any Secondary Market Transaction, including
but not limited to,


 


(i)                                     providing Lender an estoppel certificate and
such information, legal opinions and documents (including updated
non-consolidation opinions) relating to Borrower, the Guarantor, the Member,
the Mortgaged Property and any tenants of the Mortgaged Property as Lender or
the Rating Agencies or other Interested Parties (as defined below), may
reasonably request in connection with such Secondary Market Transaction,
including, without limitation, updated financial information, appraisals,
market studies, environmental reviews (Phase I’s and, if appropriate, Phase
II’s), Mortgaged Property condition reports and other due diligence
investigations together with appropriate verification of such updated
information and reports through letters of auditors and consultants, as of the
closing date of the Secondary Market Transaction,


 


(ii)                                  amending the Loan Documents and
Organizational Agreement of Borrower, updating and/or restating officer’s
certificates, title insurance and other closing items, and providing updated
representations and warranties in Loan Documents and such additional
representations and warranties as may be required by Lender or the Rating
Agencies, provided such amendment or update (1) shall not change any of the
financial terms of the Loan or result in a material increase in the Borrower’s
obligations or a material decrease in the Borrower’s rights and (2) with
respect to any amendment of an Organizational Agreement, must have been
required by the Rating Agencies,


 


(iii)                               participating in bank, investors and Rating Agencies’ meetings if
requested by Lender,


 


(iv)                              upon Lender’s request, amending the Loan Documents (and updating and/or
restating officer’s certificates, title insurance and other closing items in
connection therewith) to divide the Loan into a first and a second mortgage
loan, or into a one or more loans secured by mortgages and by ownership
interests in Borrower in whatever proportion Lender determines,  which separated loans may have different
interest rates and amortization schedules (but with aggregated financial terms
which are equivalent to


 


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that
of the Loan prior to such separation, including, so long as an Event of Default
has not occurred and is not continuing, a ratable allocation of prepayments
among the Loan components) and thereafter to engage in separate Secondary
Market Transactions with respect to all or any part of the indebtedness and
loan documentation, and


 


(v)                                 reviewing the offering documents relating to
any Secondary Market Transaction to ensure that all information concerning
Borrower, the Guarantor, the Mortgaged Property, and the Loan is correct, and
certifying to the accuracy thereof.


 


Lender
shall be permitted to share all such information with the investment banking
firms, Rating Agencies, accounting firms, law firms and other third-party
advisory firms and trustees, purchasers, transferees, assignees, trustees,
servicers and actual or potential investors involved with the Loan and the Loan
Documents or the applicable Secondary Market Transaction (collectively, “Interested
Parties”).  Lender and all of the
aforesaid Interested Parties shall be entitled to rely on the information
supplied by, or on behalf of, Borrower. 
Lender may publicize the existence of the Loan in connection with its
marketing for a Secondary Market Transaction or otherwise as part of its
business development.  Borrower shall
provide such reasonable access to the Mortgaged Property and personnel of the
Manager and of Borrower’s constituent members and the business and operations
of all of the foregoing as Lender or other Interested Parties may request in
connection with any such Secondary Market Transaction.  Borrower understands that any such
information may be incorporated into any offering circular, prospectus,
prospectus supplement, private placement memorandum or other offering documents
for any Secondary Market Transaction. 
Without limiting the foregoing, Borrower and Guarantor shall provide in
connection with each of (i) a preliminary and a final private placement
memorandum or (ii) a preliminary and final prospectus or prospectus supplement,
as applicable (the documents referred to in the foregoing clauses (i) and (ii),
collectively, the “Disclosure Documents”), an agreement certifying that
Borrower and Guarantor have examined such Disclosure Documents specified by
Lender and that each such Disclosure Document, as it relates to Borrower,
Guarantor, any Affiliates, the Mortgaged Property and Manager, does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading (a “Disclosure
Certificate”).  Borrower and
Guarantor shall indemnify, defend, protect and hold harmless Lender, its
Affiliates, directors, employees, agents and each Person, if any, who controls
Lender or any such Affiliate within the meaning of Section 15 of the Securities
Act of 1933 or Section 20 of the Securities Exchange Act of 1934, and any other
placement agent or underwriter with respect to any Securitization or Secondary
Market Transaction from and against any losses, claims, damages, liabilities,
costs and expenses (including, without limitation, reasonable attorneys’ fees
and disbursements) that arise out of or are based upon any untrue statement of
any material fact contained in any Disclosure Certificate or other information
or documents furnished by Borrower, Guarantor or their Affiliates or in any
representation or warranty of any Borrower contained herein or in the other
Loan Documents or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated in such
information or necessary in order to make the statements in such information
not materially misleading.  In any
Secondary Market Transaction, Lender may transfer its obligations under this
Loan Agreement and under the other Loan Documents (or may transfer the portion
thereof corresponding to the transferred portion of the Indebtedness), and
thereafter Lender shall be relieved of any obligations hereunder and under the
other Loan Documents arising after the date


 


83

















 


of
said transfer with respect to the transferred interest.  Each transferee investor shall become a
“Lender” hereunder.  The holders from
time to time of the Loan and/or any other interest of the “Lender” under this
Loan Agreement and the other Loan Documents may from time to time enter into
one or more co-lender or similar agreements in their discretion.  Borrower acknowledges and agrees that such
agreements, as the same may from time to time be amended, modified or restated,
may govern the exercise of the powers and discretionary authority of the Lender
hereunder and under the other Loan Documents, but Borrower shall be entitled to
rely upon any actions taken by Lender or the designated servicer(s) or agent(s)
for Lender, whether or not within the scope of its power and authority under
such other agreements.  Lender shall be
responsible for the payment of the expenses incurred by Lender in connection
with any Secondary Market Transaction, and if Lender requires Borrower’s
cooperation in connection with any Secondary Market Transaction, Borrower shall
be entitled to obtain reimbursement from Lender for reasonable out-of-pocket
costs and expenses,  including
reasonable legal fees and expenses, incurred by it in responding to Lender’s
requirements for cooperation hereunder.


 


(x)                                   Insurance.


 


(i)                                     Borrower, at its sole cost and expense, shall
keep the Improvements and Equipment insured (including, but not limited to, any
period of renovation, alteration and/or construction) during the term of the
Loan with the coverage and in the amounts required under this Agreement for the
mutual benefit of Borrower and Lender against loss or damage by fire,
lightning, wind and such other perils as are customarily included in a standard
“all-risk” or “special cause of loss” form and against loss or damage by other
risks and hazards covered by a standard extended coverage insurance policy
(including, without limitation, fire, lightning, hail, hurricane, windstorm,
tidal wave, explosion, acts of terrorism certified under the Terrorism Risk
Insurance Act of 2002, riot and civil commotion, vandalism, malicious mischief,
strike, water damage, sprinkler leakage, collapse, burglary, theft, mold and
microbial matter coverage arising as a result of covered perils under the
standard “all risk” policy and such other coverages as may be reasonably
required by Lender on the special form (formerly known as an all risk
form)).  Such insurance shall be in an
amount (i) equal to at least the greater of then full replacement cost of the
Improvements and Equipment (exclusive of the cost of foundations and footings),
without deduction for physical depreciation and the outstanding Principal
Indebtedness, and (ii) such that the insurer would not deem Borrower a
co-insurer under said policies.  The
policies of insurance carried in accordance with this Section 5.1(x)
shall be paid not less than ten (10) days in advance of the due date thereof
and shall contain the “Replacement Cost Endorsement” with a waiver of
depreciation.  If terrorism coverage is
excluded on an “all-risk” basis, then Borrower shall obtain coverage for
terrorism and similar acts in the stand alone terrorism market.  Notwithstanding the foregoing, the terrorism
coverage may exclude non-certified Terrorism Risk Insurance Act of 2002
coverage (i.e. the actions of domestic actors).


 


(ii)                                  Borrower, at its sole cost and expense, for
the mutual benefit of Borrower and Lender, shall also obtain and maintain or
cause to be obtained and maintained during the entire term of the Loan the
following policies of insurance:


 


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(A)                              flood insurance, if any part of the Mortgaged Property is located in an
area identified by the Federal Emergency Management Agency as an area having
special flood hazards and in which flood insurance has been made available
under the National Flood Insurance Act of 1968, the Flood Disaster Protection
Act of 1973 or the National Flood Insurance Reform Act of 1994 (and any
amendment or successor act thereto) in an amount at least equal to the maximum
limit of coverage available with respect to the Improvements and Equipment
under said Act;


 


(B)                                Comprehensive General Liability insurance, including a broad form
comprehensive general liability endorsement and coverage for broad form
property damage, contractual damages, personal injuries (including death
resulting therefrom) and a liquor liability endorsement if liquor is sold on
the Mortgaged Property, containing minimum limits of liability of $1 million
for both injury to or death of a person and for property damage per occurrence
and $3 million in the aggregate for the Mortgaged Property, and such other
liability insurance reasonably requested by Lender; in addition, at least $25
million excess and/or umbrella liability insurance shall be obtained and
maintained for any and all claims, including all legal liability imposed upon
Borrower and all court costs and attorneys’ fees incurred in connection with
the ownership, operation and maintenance of the Mortgaged Property;


 


(C)                                business interruption insurance (including rental value) in an annual
aggregate amount equal to the estimated income from the Leases of each
Mortgaged Property (including, without limitation, the loss of all Rents and
additional Rents payable by all of the lessees under the Leases (whether or not
such Leases are terminable in the event of a fire or casualty)), such insurance
to cover losses for a period of twelve (12) months after the date of the fire
or casualty in question, plus an extended period of indemnity commencing at the
time repairs are completed for a period of not less than 30 days and to be
increased or decreased, as applicable, from time to time during the term of the
Loan if, and when, the gross revenues from the Leases of the Mortgaged Property
materially increase or decrease, as applicable (including, without limitation,
increases from new Leases and renewal Leases entered into in accordance with
the terms of this Agreement), to reflect all increased Rent and increased
additional Rent payable by all of the lessees under such renewal Leases and all
Rent and additional Rent payable by all of the lessees under such new Leases;


 


(D)                               all risk physical loss and damage coverage with respect to heating and
air conditioning equipment, located in, on, or about the Improvements, except
the coverage required under this clause (ii)(D) shall not be required to be
maintained as a separate policy and may be included as part of the coverages
provided under clause (i);


 


(E)                                 worker’s compensation insurance coverage (in
amounts not less than the statutory minimums for all persons employed by
Borrower or its tenants at the Mortgaged Property and in compliance with all
other requirements of


 


85

















 


applicable
local, state and federal law) and “Employers Liability” insurance in amounts
not less than required by statute;


 


(F)                                 during any period of repair or restoration,
builder’s “all risk” insurance in an amount equal to not less than the full
insurable value of the Mortgaged Property against such risks (including,
without limitation, fire and extended coverage and collapse of the Improvements
to agreed limits) as Lender may request, in form and substance acceptable to
Lender;


 


(G)                                if reasonably required by Lender with respect to any zoning matter that
is reasonably likely to materially adversely affect the value of any Mortgaged
Property, ordinance or law coverage to compensate for the cost of demolition,
increased cost of construction, and loss to any undamaged portions of the
Improvements, if the current use of the Mortgaged Property or the Improvements
themselves are or become “nonconforming” pursuant to the applicable zoning
regulations, unless full rebuildability following casualty is otherwise
permitted under such zoning regulations notwithstanding such nonconformity;


 


(H)                               if required by Lender as a result of any Mortgaged Property being
located in an area with a high degree of seismic activity, earthquake damage
insurance in an amount and form acceptable to Lender;


 


(I)                                    such other insurance as may from time to time
be reasonably required by Lender in order to protect its interests with respect
to the Loan and the Mortgaged Property and to conform such requirements to then
current standards for a Secondary Market Transaction.


 


(iii)                               All policies of insurance (the “Policies”) required pursuant to
this Section 5.1(x):


 


(A)                              shall be issued by an insurer approved by Lender which has a claims
paying ability rating of not less than “AA” (or the equivalent) by Rating
Agencies satisfactory to Lender (one of which shall be S&P) and A:XIII or
better as to claims paying ability by AM Best, provided, that notwithstanding
the foregoing, (1) in the event American Modern Insurance shall be the insurer
providing the standard all-risk insurance policy, then such insurer shall not
be required to satisfy such claims paying ability rating by the Rating Agencies
(but will be required to have and maintain a claims paying ability rating by AM
Best of A+:VIII or better), so long as the Borrower delivers to the Lender
evidence reasonably satisfactory to the Lender that the insurer has purchased
reinsurance with respect to not less than 70% of such policy from a reinsurer
with a claims paying ability rating by the Rating Agencies of not less than “A”
(or the equivalent) by Rating Agencies satisfactory to the Lender (one of which
shall be S&P) and (2) the insurer providing the worker’s compensation
insurance coverage shall only be required to maintain a claims paying ability
rating of not less than “A” (or the equivalent) by Rating Agencies satisfactory
to the Lender (one of which shall be S&P),


 


86

















 


(B)                                shall name Lender as an additional insured and contain a standard
noncontributory mortgagee clause and a Lender’s Loss Payable Endorsement, or their
equivalents, naming Lender (and/or such other party as may be designated by
Lender) as the party to which all payments made by such insurance company shall
be paid,


 


(C)                                shall be maintained throughout the term of the Loan without cost to
Lender,


 


(D)                               shall contain such provisions as Lender deems reasonably necessary or
desirable to protect its interest (including, without limitation, endorsements
providing that neither Borrower, Lender nor any other party shall be a
co-insurer under said Policies and that Lender shall receive at least thirty
(30) days prior written notice of any modification, reduction or cancellation),


 


(E)                                 shall contain a waiver of subrogation against
Lender,


 


(F)                                 shall be for a term of not less than one
year,


 


(G)                                shall provide for claims to be made on an occurrence basis,


 


(H)                               shall contain an agreed value clause updated annually (if the amount of
coverage under such policy is based upon the replacement cost of the Mortgaged
Property),


 


(I)                                    shall designate Lender as “mortgagee and loss
payee” (except general public liability and excess liability, as to which
Lender shall be named as additional insured),


 


(J)                                   shall be issued by an insurer licensed in the
state in which the Mortgaged Property is located,


 


(K)                               shall provide that Lender may, but shall not be obligated to, make
premium payments to prevent any cancellation, endorsement, alteration or
reissuance, and such payments shall be accepted by the insurer to prevent same,
and


 


(L)                                 shall be reasonably satisfactory in form and
substance to Lender and reasonably approved by Lender as to amounts, form, risk
coverage, deductibles, loss payees and insureds to the extent not otherwise
specified in this Section 5.1(x). 
All property damage insurance policies (except for flood and earthquake
policies) must automatically reinstate after each loss.


 


Copies
of said Policies, certified as true and correct by Borrower, or insurance
certificates thereof, shall be delivered to Lender.  Not later than ten (10) days prior to the expiration date of each
of the Policies, Borrower shall deliver to Lender satisfactory evidence of the
renewal of each Policy.  The insurance
coverage required under this Section 5.1(x) may be effected under a
blanket policy or policies covering the Mortgaged Property and other


 


87

















 


property
and assets not constituting a part of the Collateral; provided that any
such blanket policy shall provide at least the same amount and form of
protection as would a separate policy insuring the Mortgaged Property
individually, which amount shall not be less than the amount required pursuant
to this Section 5.1(x) and which shall in any case comply in all other
respects with the requirements of this Section 5.1(x).  Upon demand therefor, Borrower shall
reimburse Lender for all of Lender’s or its designee’s reasonable costs and
expenses incurred in obtaining any or all of the Policies or otherwise causing
the compliance with the terms and provisions of this Section 5.1(x),
including (without limitation) obtaining updated flood hazard certificates and
replacement of any so-called “forced placed” insurance coverages to the extent
Borrower was required to obtain and maintain any such Policy or Policies
hereunder and failed to do so.  Borrower
shall pay the premiums for such Policies (the “Insurance Premiums”) as
the same become due and payable and shall furnish to Lender evidence of the
renewal of each of the Policies with receipts for the payment of the Insurance
Premiums or other evidence of such payment reasonably satisfactory to Lender
(provided, however, that Borrower is not required to furnish such evidence of
payment to Lender in the event that such Insurance Premiums have been paid by
Lender).  If Borrower does not furnish
such evidence and receipts at least ten (10) days prior to the expiration of
any expiring Policy, then Lender may procure, but shall not be obligated to
procure, such insurance and pay the Insurance Premiums therefor, and Borrower
agrees to reimburse Lender for the cost of such Insurance Premiums promptly on
demand.  Within thirty (30) days after
request by Lender, Borrower shall obtain such increases in the amounts of
coverage required hereunder as may be reasonably requested by Lender, based on
then industry-standard amounts of coverage then being obtained by prudent
owners of properties similar to the Mortgaged Property in the same applicable
market region as the Mortgaged Property. 
Borrower shall give Lender prompt written notice if Borrower receives
from any insurer any written notification or threat of any actions or
proceedings regarding the non-compliance or non-conformity of the Mortgaged
Property with any insurance requirements.


 


(iii)                               If the Mortgaged Property shall be damaged or destroyed, in whole or in
part, by fire or other casualty, Borrower shall give prompt notice thereof to
Lender.


 


(A)                              In case of loss covered by Policies, Lender may either (a) jointly with
a Borrower settle and adjust any claim and agree with the insurance company or
companies on the amount to be paid on the loss or (b) allow Borrower to agree
with the insurance company or companies on the amount to be paid upon the loss;
provided, that Borrower may settle and adjust losses without
participation by Lender aggregating not in excess of 1% of the Principal
Indebtedness, agree with the insurance company or companies on the amount to be
paid upon the loss and collect and receipt for any such Insurance Proceeds; provided,
further, that if (x) at the time of the settlement of such claim an
Event of Default has occurred and is continuing or (y) Lender and Borrower are
unable to agree upon a joint settlement or (z) Lender disapproves of Borrower’s
proposed settlement with the insurance company, then Lender shall settle and
adjust such claim without the consent of Borrower, and for such purpose is
hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an
interest.  In


 


88

















 


any
such case Lender shall and is hereby authorized to collect and receipt for any
such Insurance Proceeds subject to and to the extent provided for in this
Agreement.  The reasonable out-of-pocket
expenses incurred by Lender in the adjustment and collection of Insurance
Proceeds shall become part of the Indebtedness and be secured by the Mortgages
and shall be reimbursed by Borrower to Lender upon demand therefor.


 


(B)                                In the event of any insured damage to or destruction of the Mortgaged
Property or any part thereof (herein called an “Insured Casualty”) where
(1) the aggregate amount of the loss, as reasonably determined by an
Independent insurance adjuster, is less than thirty percent (30%) of the
Lender’s reasonable estimate of the fair market value of the individual
Mortgaged Property affected by the damage or destruction, (2) in the reasonable
judgment of Lender, the Mortgaged Property can be restored, replaced and/or
rebuilt (collectively, the “Restoration”) by not later than the first to
occur of (a) twelve (12) months after the date of casualty and (b) the
expiration of the business interruption insurance and, in any case, not later
than six (6) months prior to the Maturity Date to an economic unit
substantially in the condition it was in immediately prior to the Insured
Casualty and in compliance with all zoning, building and other applicable Legal
Requirements (the “Pre-Existing Condition”) not less materially valuable
(including an assessment of the impact of the termination of any Leases due to
such Insured Casualty) and not less useful than the same was prior to the Insured
Casualty, (3) Lender reasonably determines that the rental income of the
Mortgaged Property, after the Restoration thereof to the Pre-Existing
Condition, will be sufficient to meet all Operating Expenses, payments for
Reserves and payments of principal and interest under the Loan and satisfy the
Debt Service Coverage Test, and (4) tenant leases requiring payment of annual
rent equal to at least seventy-five percent (75%) of the gross revenues from
the Mortgaged Property during the twelve (12) month period immediately
preceding the date of such fire or other casualty remain in full force and
effect during and after the Restoration of the Property (subject to the rent
abatement provisions thereof applicable as a result of the casualty, so long as
such abatement will end, and full rental payments shall resume, upon
substantial completion of the Restoration), or if Lender otherwise elects to
allow a Borrower to restore the Mortgaged Property, then, if no Event of
Default shall have occurred and be continuing, the Insurance Proceeds (after
reimbursement of any reasonable out-of-pocket expenses incurred by Lender in
connection with the collection of any applicable Insurance Proceeds) shall be
made available to reimburse Borrower for the cost of restoring, repairing,
replacing or rebuilding the Mortgaged Property or part thereof subject to the
Insured Casualty, as provided for below. 
Borrower hereby covenants and agrees to commence and diligently to
prosecute such Restoration of the affected Mortgaged Property as nearly as
possible to the Pre-Existing Condition. 
Borrower shall pay all out-of-pocket costs (and if required by Lender,
Borrower shall deposit the total thereof with Lender in advance) of such
Restoration in excess of the Insurance Proceeds made available pursuant to the
terms hereof.


 


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(C)                                Except as provided above, the Insurance Proceeds collected upon any
Insured Casualty shall, at the option of Lender in its sole discretion, be
applied to the payment of the Indebtedness or applied to the cost of
Restoration of the affected Mortgaged Property or part thereof subject to the
Insured Casualty, in the manner set forth below.


 


(D)                               Regardless of whether Insurance Proceeds, if any, are sufficient or are
made available to Borrower for the Restoration of any portion of the affected
Mortgaged Property, Borrower covenants to complete such restoration of the
affected Mortgaged Property to be of at least comparable value as prior to such
damage or destruction, all to be effected in accordance with Legal Requirements
and plans and specifications approved in advance by Lender, such approval not
to be unreasonably withheld or delayed.


 


(E)                                 In the event Borrower is entitled to
reimbursement out of Insurance Proceeds, such proceeds shall be held by Lender
in the Loss Proceeds Account and disbursed from time to time as the Restoration
progresses upon Lender being furnished with (1) evidence reasonably
satisfactory to it (which evidence may include inspection(s) of the work
performed) that the Restoration covered by the disbursement has been completed
in accordance with plans and specifications approved by Lender, (2) evidence
reasonably satisfactory to it of the estimated cost of completion of the
Restoration, (3) funds, or, at Lender’s option, assurances reasonably
satisfactory to Lender that such funds are available and sufficient in addition
to the Insurance Proceeds to complete the proposed Restoration, and (4) such
architect’s certificates, waivers of lien, contractor’s sworn statements, title
insurance endorsements, bonds and other evidences of cost, payment and
performance of the foregoing Restoration as Lender may reasonably require and
approve.  Lender may, in any event, require
that all plans and specifications for such Restoration be submitted to and
reasonably approved by Lender prior to commencement of work.  Lender may retain a construction consultant
to inspect such work and review Borrower’s request for payments and Borrower
shall, on demand by Lender, reimburse Lender for the reasonable fees and
disbursements of such consultant.  No
payment made prior to the final completion of the Restoration shall exceed
ninety percent (90%) of the hard construction costs value of the work performed
from time to time (except for restoration work on a trade by trade basis or on
an hourly basis for professional services in which event, payment may be made
in full upon the completion of such work). 
No funds other than Insurance Proceeds shall be disbursed prior to
disbursement of such proceeds; and, at all times, the undisbursed balance of
such Insurance Proceeds remaining in the Loss Proceeds Account, together with
funds deposited therein to pay the costs of the Restoration by or on behalf of
Borrower, shall be at least sufficient in the reasonable judgment of Lender to
pay for the cost of completion of the Restoration free and clear of all liens
or claims for lien, except for Permitted Encumbrances.  Any surplus which may remain out of Insurance
Proceeds held by Lender after payment of such costs of restoration, repair,
replacement or rebuilding shall, at the option of Lender in its sole
discretion, be


 


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applied
to the payment of the Indebtedness or be paid to Borrower so long as no Event
of Default has occurred and is continuing.


 


(F)                                 Borrower shall not carry separate insurance,
concurrent in kind or form or contributing in the event of loss, with any
insurance required under this Agreement that would be considered “co-insurance”
or adversely affect the ability to collect under a policy of insurance required
hereunder.


 


(y)                                 Condemnation.


 


(i)                                     Borrower shall promptly give Lender written
notice of the actual or threatened commencement of any proceeding for a Taking
and shall deliver to Lender copies of any and all papers served in connection
with such proceedings.  Lender is hereby
irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest,
with exclusive power to collect, receive and retain any Condemnation Proceeds
for said Taking.  With respect to any
compromise or settlement in connection with such proceeding, Lender shall
jointly with Borrower compromise and reach settlement unless at the time of
such Taking an Event of Default has occurred and is continuing and the
Indebtedness has been accelerated, in which event Lender shall compromise and
reach settlement without the consent of Borrower.  Notwithstanding the foregoing provisions of this Section
5.1(y), Borrower is authorized to negotiate, compromise and settle, without
participation by Lender, Condemnation Proceeds of up to 1% of the Principal
Indebtedness in connection with any Taking. 
Notwithstanding any Taking, Borrower shall continue to pay the
Indebtedness at the time and in the manner provided for in this Agreement and
the other Loan Documents and the Indebtedness shall not be reduced except in
accordance herewith.


 


(ii)                                  Borrower shall cause the Condemnation
Proceeds to be paid directly to Lender. 
Lender may, in its sole discretion, apply any such Condemnation Proceeds
to the reduction or discharge of the Indebtedness (whether or not then due and
payable).


 


(iii)                               With respect to a Taking in part, which shall mean any Taking which
does not render the affected Mortgaged Property physically or economically
unsuitable in the reasonable judgment of Lender for the use to which it was
devoted prior to the Taking, Borrower shall cause the Condemnation Proceeds to
be paid to Lender as described above, and if Lender does not elect to apply the
same to the Indebtedness as provided in Section 5.1(y)(ii) above, Lender
shall deposit such Condemnation Proceeds in the Loss Proceeds Account and the
same shall be made available for application to the cost of Restoration of the
affected Mortgaged Property and disbursed from time to time as the Restoration
progresses upon Lender being furnished with (1) evidence reasonably
satisfactory to it (which evidence may include inspection(s) of the work
performed) that the Restoration covered by the disbursement has been completed
in accordance with plans and specifications approved by Lender, (2) evidence
reasonably satisfactory to it of the estimated cost of completion of the
Restoration, (3) funds, or, at Lender’s option, assurances satisfactory to
Lender that such funds are available and sufficient in addition to the
Condemnation Proceeds to complete the proposed Restoration, and (4) such
architect’s certificates, waivers of lien, contractor’s sworn statements, title
insurance


 


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endorsements,
bonds and other evidences of cost, payment and performance of the foregoing
repair, restoration, replacement or rebuilding as Lender may reasonably require
and approve.


 


(iv)                              Regardless of whether Condemnation Proceeds are made available for such
purpose, Borrower hereby covenants to complete the Restoration of the affected
Mortgaged Property as nearly as possible to the Pre-Existing Condition and to
be of at least comparable value and, to the extent commercially practicable, of
substantially the same character as prior to the Taking, all to be effected in
accordance with applicable law and plans and specifications reasonably approved
in advance by Lender.  Borrower shall
pay all costs (and if required by Lender, Borrower shall deposit the total
thereof with Lender in advance) of such Restoration in excess of the
Condemnation Proceeds made available pursuant to the terms hereof.  Lender may, in any event, require that all
plans and specifications for such Restoration be submitted to and reasonably
approved by Lender prior to commencement of work.  Lender may retain a construction consultant to inspect such work
and review any request by Borrower for payments and Borrower shall, on demand
by Lender, reimburse Lender for the reasonable fees and disbursements of such
consultant.  No payment made prior to
the final completion of the Restoration shall exceed ninety percent (90%) of
the hard construction costs value of the construction work performed from time to
time (except for restoration work on a trade by trade basis or on an hourly
basis for professional services in which event, payment may be made in full
upon the completion of such work); funds other than Condemnation Proceeds shall
be disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Lender, together
with funds deposited for that purpose or irrevocably committed to the repayment
of Lender by or on behalf of Borrower for that purpose, shall be at least
sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the restoration, repair, replacement or rebuilding, free and
clear of all liens or claims for lien. 
Any surplus which may remain out of Condemnation Proceeds held by Lender
after payment of such costs of restoration, repair, replacement or rebuilding
shall, at the option of Lender in its sole discretion, be applied to the
payment of the Indebtedness or be paid to Borrower so long as no Event of
Default has occurred and is continuing.


 


(v)                                 If the affected Mortgaged Property is sold,
through foreclosure or otherwise, prior to the receipt by Lender of any such
Condemnation Proceeds to which it is entitled hereunder, Lender shall have the
right, whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to have reserved in any foreclosure decree a right to
receive said award or payment, or a portion thereof sufficient to pay the
Indebtedness.  In no case shall any such
application reduce or postpone any payments otherwise required pursuant to this
Agreement, other than the final payment on the Note.


 


(z)                                   Leases and Rents.


 


(i)                                     Borrower absolutely and unconditionally
assigns to Lender, Borrower’s right, title and interest in all current and
future Leases and Rents as collateral for the Loan, it being intended by
Borrower that this assignment constitutes a present, absolute


 


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assignment
and not an assignment for additional security only.  Such assignment to Lender shall not be construed to bind Lender
to the performance of any of the covenants, conditions or provisions contained
in any such Lease or otherwise impose any obligation upon Lender.  Borrower shall execute and deliver to Lender
such additional instruments, in form and substance reasonably satisfactory to
Lender, as may hereafter be reasonably requested in writing by Lender to
further evidence and confirm such assignment. 
Nevertheless, subject to the terms of this Section 5.1(z), Lender
grants to Borrower a license to lease, maintain, operate and manage the
Mortgaged Property and to collect, use and apply the Rents in accordance with
the terms hereof and otherwise act as the landlord under the Leases, which
license shall be deemed automatically revoked upon the occurrence and during
the continuance of an Event of Default under this Agreement.  Any portion of the Rents held by Borrower
shall be held in trust for the benefit of Lender for use in the payment of the
Indebtedness.  Upon the occurrence of an
Event of Default and during the continuance thereof, the license granted to
Borrower herein shall automatically be revoked, and Lender shall immediately be
entitled to possession of all Rents, whether or not Lender enters upon or takes
control of the Mortgaged Property. 
Lender is hereby granted and assigned by Borrower the right, at its
option, upon revocation of the license granted herein, to enter upon the
Mortgaged Property in person, by agent or by court-appointed receiver to
collect the Rents.  Any Rents collected
after the revocation of the license shall be applied toward payment of the
Indebtedness as set forth in Section 2.8 hereof.


 


(ii)                                  All Leases entered into by Borrower shall
provide for rental rates comparable to then-existing local market rates and
terms and conditions commercially reasonable and consistent with
then-prevailing local market terms and conditions for similar type properties,
and in no event shall Borrower, absent Lender’s prior written consent, which
consent shall not be unreasonably withheld or delayed, enter into any Leases
(a) other than leases of Homesites to owners and occupants of residential
manufactured homes or mobile homes having lease terms not in excess of two
years, and (b) with any Affiliates of Borrower, except as indicated in Schedule
7 attached hereto.  Borrower shall
furnish Lender with (1) detailed term sheets in advance in the case of any
Leases, modifications, amendments or renewals for which Lender’s consent is
required and (2) in the case of any other Leases, executed copies of such
Leases upon written request.  All
renewals or amendments or modifications of Leases that do not satisfy the
requirements of the first sentence of this Section 5.1(z)(ii) shall be
subject to the prior approval of Lender, which approval shall not be
unreasonably withheld or delayed.  All
Leases entered into after the Closing Date with new tenants (i.e. not renewals
of existing tenants as of the Closing Date) shall be written on the standard
lease form for new tenants previously approved by Lender which form as of the
Closing Date is set forth on Schedule 10 attached hereto; provided that
notwithstanding the foregoing, the Borrower may modify any standard lease form
without such approval to the extent necessary to conform such form to any
applicable Legal Requirements (and, upon reasonable request of the Lender, the
Borrower shall notify the Lender in writing with respect to such
modification).  The Borrower shall not
materially change the standard lease form without Lender’s prior written
consent, which consent shall not be unreasonably withheld or delayed, or except
as necessary to comply with applicable Legal Requirements.  Borrower,


 


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(A)                              shall observe and perform all of the material obligations imposed upon
the lessor under the Leases and shall not do or permit to be done anything to
materially impair the value of the Leases as security for the Indebtedness;


 


(B)                                shall not execute any other assignment of lessor’s interest in any of
the Leases or Rents;


 


(C)                                shall enforce all of the material terms, covenants and conditions
contained in the Leases upon the part of the lessee thereunder to be observed
or performed and shall effect a termination or diminution of the obligations of
tenants under leases, only in a manner that a prudent owner of a similar
property to the Mortgaged Property would enforce such terms covenants and
conditions or effect such termination or diminution in the ordinary course of
business;


 


(D)                               except as otherwise set forth in the Monthly Statement submitted to
Lender, shall not collect any of the Rents more than one (1) month in advance;
and


 


(E)                                 shall not convey or transfer or suffer or
permit a conveyance or transfer of the Mortgaged Property or of any interest therein
so as to effect a merger of the estates and rights of, or a termination or
diminution of the obligations of, lessees thereunder.


 


(iii)                               Borrower shall deposit security deposits of lessees which are turned
over to or for the benefit of Borrower or otherwise collected by or on behalf
of Borrower, into the Security Deposit Account and shall not commingle such
funds with any other funds of Borrower. 
Any bond or other instrument which Borrower is permitted to hold in lieu
of cash security deposits under any applicable Legal Requirements shall be
maintained in full force and effect unless replaced by cash deposits as
hereinabove described, shall, if permitted pursuant to Legal Requirements, name
Lender as payee or mortgagee thereunder (or at Lender’s option, be fully
assignable to Lender) and shall, in all respects, comply with any applicable
Legal Requirements and otherwise be reasonably satisfactory to Lender.  Borrower shall, upon request, provide Lender
with evidence reasonably satisfactory to Lender of Borrower’s compliance with
the foregoing.  Upon the occurrence and
during the continuance of any Event of Default, Borrower shall, upon Lender’s
request, if permitted by any applicable Legal Requirements, turn over to Lender
the security deposits (and any interest theretofore earned thereon) with
respect to all or any portion of the Mortgaged Property, to be held by Lender
subject to the terms of the Leases.


 


(aa)                            Maintenance of Mortgaged Property. 
Borrower shall cause the Mortgaged Property to be maintained in a good
and safe condition and repair, subject to wear and tear and damage caused by
casualty or condemnation.  The
Improvements and the Equipment shall not be removed, demolished or altered
(except for (1) normal replacement of the Equipment, (2) Improvements
contemplated in an approved Operating Budget or pursuant to Leases in effect
from time to time, (3) removals, demolition or alterations that do not cost
more than 1% of the Principal Indebtedness or (4) an emergency which the
Borrower shall have notified the Lender of


 


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in writing, including the action taken to remediate)
without the consent of Lender which consent shall not be unreasonably withheld
or delayed.  Except with respect to an
Insured Casualty which shall be governed by the terms and conditions provided
herein, Borrower shall, or shall cause any tenants obligated under their
respective Leases to, promptly repair, replace or rebuild any part of the
Mortgaged Property that becomes damaged, worn or dilapidated.  Borrower shall complete and pay for any
structure at any time in the process of construction or repair on the
Land.  Borrower shall not initiate, join
in, or consent to any change in any private restrictive covenant, zoning law or
other public or private restriction, limiting or defining the uses which may be
made of any Mortgaged Property or any part thereof without the written consent
of Lender, which consent shall not be unreasonably withheld or delayed.  If under applicable zoning provisions the
use of all or any portion of the Mortgaged Property is or shall become a
nonconforming use, Borrower will not cause or permit such nonconforming use to
be discontinued or abandoned if such discontinuance of abandonment would cause
such nonconforming use to no longer be permitted without the express written
consent of Lender, which consent shall not be unreasonably withheld or
delayed.  Borrower shall not (i) change
the use of any of the Land or Improvements in any material respect, (ii) permit
or suffer to occur any waste on or to any Mortgaged Property or to any portion
thereof or (iii) take any steps whatsoever to convert any Mortgaged Property,
or any portion thereof, to a condominium or cooperative form of management.


 


(bb)                          Prohibited Persons.  Borrower covenants and agrees to deliver (from time to time) to
Lender any certification or other evidence as may be requested by Lender in its
sole and absolute discretion, confirming that: (i) neither Borrower, Member,
General Partner, Guarantor nor their respective officers, directors, partners,
members or majority-owned Affiliates is a Prohibited Person; and (ii) neither
Borrower, Member, General Partner, Guarantor nor their respective officers,
directors, partners, members or majority-owned Affiliates has engaged in any
business, transaction or dealings with a Person known to Borrower to be a
Prohibited Person, including, but not limited to, the making or receiving of
any contribution of funds, goods, or services, to or for the benefit of a Person
known to Borrower to be a Prohibited Person.


 


ARTICLE VI.

NEGATIVE COVENANTS


 


Section
6.1.                                   Negative Covenants. 
Borrower covenants and agrees that, until payment in full of the
Indebtedness, it will not do, directly or indirectly, any of the following
unless Lender consents thereto in writing:


 


(a)                                  Liens on the Mortgaged Property. 
Incur, create, assume, become or be liable in any manner with respect
to, or permit to exist, except as permitted by Section 5.1(b) above, any
Lien with respect to any Mortgaged Property or any portion thereof, except: (i)
Liens in favor of Lender and (ii) the Permitted Encumbrances.


 


(b)                                 Ownership and Transfer. 
Except as expressly permitted by or pursuant to this Agreement or the
other Loan Documents, own any property of any kind other than the Mortgaged
Property, or Transfer any Mortgaged Property or any portion thereof.


 


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(c)                                  Other Borrowings. 
Incur, create, assume, become or be liable in any manner with respect to
Other Borrowings.


 


(d)                                 Dissolution; Merger or Consolidation. 
Dissolve, terminate, liquidate, merge with or consolidate into another
Person.


 


(e)                                  Change In Business. 
Make any material change in the scope or nature of its business
objectives, purposes or operations, or undertake or participate in activities
other than the continuance of its present business.


 


(f)                                    Debt Cancellation. 
Cancel or otherwise forgive or release any material claim or debt owed
to Borrower by any Person, except for adequate consideration or in the ordinary
course of Borrower’s business.


 


(g)                                 Affiliate Transactions. 
Except for fees payable to Manager under the Management Agreement, (i)
pay any management, consulting, director or similar fees to any Affiliate of
Borrower or to any director or manager (other than any customary fees of the
Independent Manager), officer or employee of Borrower, (ii) directly or
indirectly enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Borrower or with any director, officer or
employee of any Affiliate of Borrower, except transactions in the ordinary
course of and pursuant to the reasonable requirements of the business of
Borrower and upon fair and reasonable terms which are no less favorable to
Borrower than would be obtained in a comparable arm’s length transaction with a
Person that is not an Affiliate of Borrower, or (iii) make any payment or
permit any payment to be made to any Affiliate of Borrower when or as to any
time when any Event of Default shall exist.


 


(h)                                 Creation of Easements. 
Except as expressly permitted by or pursuant to the Mortgages or this
Agreement, create, or permit any Mortgaged Property or any part thereof to
become subject to, any easement, license or restrictive covenant, other than a
Permitted Encumbrance, provided, that the consent of Lender shall not be
unreasonably withheld or delayed to the extent that any such easement, license
or restrictive covenant is reasonably necessary for the continued use,
enjoyment, access to or operation of the applicable Mortgaged Property.


 


(i)                                     Misapplication of Funds. 
Distribute any Rents or Moneys received from Accounts in violation of
the provisions of Section 2.12, or fail to pledge any security deposit
to Lender, or misappropriate any security deposit or portion thereof.


 


(j)                                     Certain Restrictions. 
Amend, modify or waive any of its rights under the Master Homesite Lease
Documentation, provided that Borrower shall, not less frequently than once each
six months, enter into amendments contemplated under paragraph 1 of the Master
Homesite Lease, in form reasonably satisfactory to Lender and provide the same
to Lender.  Borrower shall enforce its rights
under the Master Homesite Lease Documentation in a commercially reasonably
manner, including its right to collect and retain additional Master Lease
Deposits from time to time as provided in the Master Lease, which Borrower
shall promptly deposit into the Master Lease Deposit Account.


 


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(k)                                  Assignment of Licenses and Permits. 
Assign or transfer any of its interest in any Permits pertaining to any
Mortgaged Property, or assign, transfer or remove or permit any other Person to
assign, transfer or remove any records pertaining to any Mortgaged Property.


 


(l)                                     Place of Organization. 
Change its jurisdiction of organization, creation or formation, as
applicable, without giving Lender at least fifteen (15) days’ prior written
notice thereof and promptly providing Lender such information as Lender may
reasonably request in connection therewith.


 


(m)                               Leases.  Enter into, amend or cancel
Leases, except as permitted by this Agreement.


 


(n)                                 Management Agreement. 
Except in accordance with this Agreement, (i) terminate or cancel the
Management Agreement, (ii) consent to either the reduction of the term of or
the assignment of the Management Agreement, (iii) increase or consent to the
increase of the amount of any charges under the Management Agreement, or (iv)
otherwise modify, change, supplement, alter or amend, or waive or release any
of its rights and remedies under, the Management Agreement in any material
respect.


 


(o)                                 Plans and Welfare Plans. 
Knowingly engage in or permit any transaction in connection with which
Borrower or any ERISA Affiliate could be subject to either a material civil
penalty or tax assessed pursuant to Section 502(i) or 502(1) of ERISA or
Section 4975 of the Code, permit any Welfare Plan to provide benefits,
including without limitation, medical benefits (whether or not insured), with
respect to any current or former employee of Borrower beyond his or her
retirement or other termination of service other than (i) coverage mandated by
applicable law, (ii) death or disability benefits that have been fully provided
for by paid up insurance or otherwise or (iii) severance benefits (unless such
coverage is provided after notification of and with the reasonable approval of
Lender or pursuant to an employment or severance agreement entered into in the
ordinary course of business consistent with past practice), permit the assets
of Borrower to become “plan assets”, whether by operation of law or under
regulations promulgated under ERISA or adopt, amend (except as may be required
by applicable law) or materially increase the amount of any benefit or amount
payable under, or permit any ERISA Affiliate to adopt, amend (except as may be
required by applicable law) or materially increase the amount of any benefit or
amount payable under, any Plan or Welfare Plan, except for normal increases in
the ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits expense to Borrower
or any ERISA Affiliate.


 


(p)                                 Transfer of Ownership Interests. 
Permit any Transfer of a direct or indirect ownership interest or voting
right in Borrower (other than a Permitted Transfer).


 


(q)                                 Equipment and Inventory. 
Except pursuant to the Management Agreement, permit any Equipment owned
by Borrower to be removed at any time from any Mortgaged Property unless the
removed item is consumed or sold in the usual and customary course of business,
removed temporarily for maintenance and repair or, if removed permanently,
replaced by an article of equivalent suitability and not materially less value,
owned by Borrower free and clear of any Lien (other than Permitted
Encumbrances).


 


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(r)                                    Management Fees.  Pay
Borrower or any Affiliate of Borrower any management fees with respect to the
Mortgaged Property except for management fees paid to Manager under the
Management Agreement.


 


(s)                                  Prohibited Persons. 
With respect to Borrower, Member, General Partner, Guarantor and any of
their respective officers, directors, partners, members or majority-owned
Affiliates: (i) conduct any business, or engage in any transaction or dealing,
with any Person known to Borrower to be a Prohibited Person, including, but not
limited to, the making or receiving of any contribution of funds, goods, or
services, to or for the benefit of a Prohibited Person; or (ii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in EO13224.


 


ARTICLE VII.

EVENT OF DEFAULT


 


Section
7.1.                                   Event of Default.  The
occurrence of one or more of the following events shall be an “Event of
Default” hereunder:


 


(a)                                  if on any Payment Date Borrower fails to pay
any Monthly Debt Service Payment due and payable on such Payment Date, or if
Borrower fails to make any scheduled deposits into the Reserve Accounts when
due and payable in accordance with the provisions hereof;


 


(b)                                 if Borrower fails to pay the outstanding
Indebtedness on the Maturity Date;


 


(c)                                  if Borrower fails to pay or deposit any other
amount payable or required to be deposited pursuant to this Agreement or any
other Loan Document when due and payable in accordance with the provisions
hereof or thereof, as the case may be, and such failure continues for ten (10)
days after Lender delivers written notice thereof to Borrower (other than the
failure of the Lender to transfer available funds from the Collection Account
to a Reserve Account pursuant to Section 2.12(b);


 


(d)                                 if any representation or warranty made herein
or in any other Loan Document, or in any report, certificate, financial
statement or other Instrument, agreement or document furnished by Borrower,
Member or Guarantor in connection with this Agreement, the Note or any other
Loan Document shall be false or materially misleading as of the date such
representation or warranty was made (or if such representation or warranty
relates to an earlier date, then as of such earlier date);


 


(e)                                  if Borrower or the Guarantor makes an
assignment for the benefit of creditors;


 


(f)                                    if a receiver, liquidator or trustee shall be
appointed for Borrower or the Guarantor or if Borrower or the Guarantor shall
be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by,


 


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Borrower or the Guarantor, or if any proceeding for
the dissolution or liquidation of Borrower or the Guarantor shall be
instituted; provided, however, that if such appointment,
adjudication, petition or proceeding was involuntary and not consented to by
Borrower or the Guarantor, upon the same not being discharged, stayed or
dismissed within ninety (90) days, or if Borrower or the Guarantor shall
generally not be paying its debts as they become due;


 


(g)                                 if Borrower attempts to delegate its
obligations or assign its rights under this Agreement, any of the other Loan
Documents or any interest herein or therein, or if any Transfer of any
Mortgaged Property or any interest therein occurs, or any direct or indirect
Transfer of any direct or indirect ownership interest in Borrower occurs, other
than in accordance with or as permitted under this Agreement;


 


(h)                                 if any breach or failure to perform any of
the covenants in Article VI hereof shall occur, which breach or failure to
perform, in the case of Section 6.1(o) or (q) only, shall remain
uncured for a period of thirty (30) days after the occurrence of such breach or
failure to perform or if any material breach or failure to perform any of the
covenants in Article VIII hereof shall occur;


 


(i)                                     if an Event of Default as defined or
described in the Note or any other Loan Document occurs, whether as to Borrower
or the Mortgaged Property or any portion thereof;


 


(j)                                     if any of the assumptions made with respect
to Borrower and its Affiliates in that certain substantive non-consolidation
opinion letter dated as of February __, 2004 delivered by Holme Roberts &
Owen LLP in connection with the Loan is not true and correct in all respects;


 


(k)                                  if Borrower fails to maintain any insurance
required to be maintained pursuant to Section 5.1(x) hereof; and


 


(l)                                     if Borrower shall fail to perform any of the
terms, covenants or conditions of this Agreement, the Note, the Mortgages or
the other Loan Documents, other than as specifically otherwise referred to
above in this definition of “Event of Default,” for ten (10) days after notice
to Borrower from Lender or its successors or assigns, in the case of any
Default which can be cured by the payment of a sum of money, or for thirty (30)
days after notice from Lender or its successors or assigns, in the case of any
other Default (unless a longer notice period is otherwise provided herein or in
such other Loan Document); provided, however, that if such
non-monetary Default is susceptible of cure but cannot reasonably be cured
within such thirty (30) day period and such Borrower shall have commenced to
cure such Default within such thirty (30) day period and thereafter diligently
and expeditiously proceeds to cure the same, such thirty (30) day period shall
be extended for an additional thirty (30) days;


 


then,
upon the occurrence of any such Event of Default and at any time thereafter,
Lender or its successors or assigns, may, in addition to any other rights or
remedies available to it pursuant to this Agreement and the other Loan
Documents or at law or in equity, take such action, without further notice or
demand, as Lender or its successors or assigns, deems advisable to protect and
enforce its rights against Borrower and in and to all or any portion of the
Collateral, and may


 


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enforce
or avail itself of any or all rights or remedies provided in the Loan Documents
against Borrower and/or the Collateral (including, without limitation, all
rights or remedies available at law or in equity).  In addition to and without limiting the foregoing, upon the
occurrence of any Event of Default described in any of Sections 7.1(e), (f), or
(g), the unpaid principal amount of and accrued interest and fees on the Loan
and all other Indebtedness shall automatically become immediately due and
payable, without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other requirements of any kind, all of which are
hereby expressly waived by Borrower. 
Upon and at any time after the occurrence of any other Event of Default,
at the option of Lender, which may be exercised without notice or demand to
anyone, all or any portion of the Loan and other Indebtedness shall immediately
become due and payable.


 


Section
7.2.                                   Remedies.


 


(a)                                  Upon the occurrence of an Event of Default,
all or any one or more of the rights, powers, other remedies available to
Lender against Borrower under this Agreement or any of the other Loan Documents
executed by or with respect to Borrower, or at law or in equity may be
exercised by Lender at any time and from time to time, whether or not all or
any portion of the Indebtedness shall be declared due and payable, and whether
or not Lender shall have commenced any foreclosure proceeding or other action
for the enforcement of its rights and remedies under any of the Loan Documents
with respect to all or any portion of the Collateral.  Any such actions taken by Lender shall be cumulative and
concurrent and may be pursued independently, singly, successively, together or
otherwise, at such time and in such order as Lender may determine in its sole
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.


 


(b)                                 In the event of the foreclosure or other
action by Lender to enforce Lender’s remedies in connection with all or any
portion of the Collateral, Lender shall apply all Net Proceeds received to
repay the Indebtedness in accordance with Section 2.8, the Indebtedness
shall be reduced to the extent of such Net Proceeds and the remaining portion
of the Indebtedness shall remain outstanding and secured by the Loan Documents,
it being understood and agreed by Borrower that Borrower is liable for the
repayment of all the Indebtedness; provided, however, that the
Loan shall be deemed to have been repaid only to the extent of the Net Proceeds
actually received by Lender with respect to the Collateral and applied in
reduction of the Indebtedness evidenced by the Note in accordance with the
provisions of this Agreement, after payment by Borrower of all Transaction
Costs and costs of enforcement.


 


(c)                                  Upon and during the continuation of an Event
of Default, Lender shall have the right, but not the obligation, with respect to
any and all bankruptcy proceedings that are now or hereafter commenced in
connection with the Mortgaged Property, to (i) vote to accept or reject any
plans of reorganization, (ii) vote in any election of a trustee, (iii) elect
the treatment of secured claims as specified in Section 1111(b) of the
Bankruptcy Code, and (iv) make any other decisions requested of holders of
claims or interests that Borrower would have had the right to do in such
bankruptcy proceedings in the absence of an Event of Default.


 


Section
7.3.                                   Remedies Cumulative.  The
rights, powers and remedies of Lender under this Agreement shall be cumulative
and not exclusive of any other right, power or remedy


 


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which Lender may have against Borrower pursuant to
this Agreement or the other Loan Documents executed by or with respect to
Borrower, or existing at law or in equity or otherwise.  Lender’s rights, powers and remedies may be
pursued singly, concurrently or otherwise, at such time and in such order as
Lender may determine in Lender’s sole discretion.  No delay or omission to exercise any remedy, right or power
accruing upon an Event of Default shall impair any such remedy, right or power
or shall be construed as a waiver thereof, but any such remedy, right or power
may be exercised from time to time and as often as may be deemed
expedient.  A waiver of any Default or
Event of Default shall not be construed to be a waiver of any subsequent
Default or Event of Default or to impair any remedy, right or power consequent
thereon.  Notwithstanding any other
provision of this Agreement, Lender reserves the right to seek a deficiency
judgment or preserve a deficiency claim, in connection with the foreclosure of
any Mortgage on the Mortgaged Property, to the extent necessary to foreclose on
other parts of the Collateral.


 


Section
7.4.                                   Intentionally Omitted.


 


Section
7.5.                                   Curative Advances.  If
any Event of Default occurs and is not cured by Borrower after notice from
Lender, then Lender may expend such sums as either shall reasonably deem
appropriate to cure or attempt to cure such Event of Default.  Borrower shall immediately repay all such
sums so advanced, which sums shall immediately become part of the Indebtedness,
bear interest at the Default Rate from the date advanced until the date repaid,
and be secured by all Collateral.


 


ARTICLE VIII.

SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,

WARRANTIES AND COVENANTS


 


Section
8.1.                                   Applicable to Borrower. 
Borrower hereby acknowledges that, as a condition of Lender’s agreements
and performance of its obligations hereunder, Lender is relying on the status
of Borrower as a legal entity separate and apart from any Affiliate or other
entity and has required that Borrower maintain such status, and Lender hereby
acknowledges such reliance and requirement. 
Accordingly, Borrower hereby represents, warrants and covenants as of
the Closing Date and until such time as the Loan is paid in full, that absent
express advance written waiver from Lender, which may be withheld the Lender’s
sole discretion, Borrower:


 


(a)                                  was and will be organized solely for purpose
of owning and operating the Mortgaged Property;


 


(b)                                 has not owned, does not own and will not own
any assets other than the Mortgaged Property (including incidental personal
property necessary for the operation thereof and proceeds therefrom);


 


(c)                                  was not engaged, is not engaged and will not
engage in any business, directly or indirectly, other than the ownership,
management and operation of the Mortgaged Property;


 


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(d)                                 has not entered into and will not enter into
any contract or agreement with any partner, member, shareholder, trustee,
beneficiary, principal, joint venturer or Affiliate of Borrower except in the
ordinary course of its business pursuant to written agreements upon terms and
conditions that are intrinsically fair and substantially similar to those that
would be available on an arms-length basis with third parties other than such
Affiliate;


 


(e)                                  has not incurred and will not incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than (i) the Loan and (ii) trade payables incurred in the
ordinary course of business with trade creditors in connection with owning,
operating and maintaining the Mortgaged Property, in such amounts as are normal
and reasonable under the circumstances, provided such debt is not evidenced by
a promissory note or other security instrument and is not at any time in an aggregate
amount in excess of two percent (2%) of the Principal Indebtedness, and further
provided that all such trade debts are paid within sixty (60) days after the
same are incurred (excluding therefrom any equipment financing paid within
sixty (60) days after the same are incurred) and trade payables being disputed
or contested in good faith by the Borrower and in the same manner and with the
same deposits as Lien Claims set forth in Section 5.1(b)(ii) of this
Agreement;)


 


(f)                                    has not made and will not make any loan or
advances to any Person (including any of its Affiliates), or pledge its assets
for the benefit of any other Person, or seek or obtain credit or incur any
obligation to any third party based upon the assets of any other Person, or
induce any third party to rely on the creditworthiness of any other Person;


 


(g)                                 has remained and as of the Closing Date
reasonably expects to remain, solvent, and has maintained, and as of the
Closing Date reasonably expects to maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations;


 


(h)                                 has not acquired and will not acquire
obligations or securities of any Person;


 


(i)                                     has not failed and will not fail to correct
any known misunderstanding or misrepresentation regarding its separate
identity;


 


(j)                                     has done or caused to be done and will do all
things necessary to preserve its existence;


 


(k)                                  shall continuously maintain its existence and
good standing and be qualified to do business in all states necessary to carry
on its business, including the state in which the Mortgaged Property is
located;


 


(l)                                     has conducted and operated and will conduct
and operate its business solely in its own name, with all oral and written
communications from Borrower, including, without limitation, correspondence,
invoices, purchase orders, billing statements, applications and business forms,
made solely in the name of Borrower;


 


(m)                               has accurately maintained and will continue
to accurately maintain books, records, bank accounts, accounting records,
financial statements and other entity documents


 


102

















 


separate from those of its partners, members,
shareholders, trustees, beneficiaries, principals, Affiliates, and any other
Person, with such accounting records and financial statements having been
prepared and kept in accordance with reasonable accounting practices applied on
a consistent basis, and such financial statements of Borrower shall be prepared
in a manner that indicates (through appropriate footnotes if necessary) the
existence of Borrower and its assets and liabilities separate and apart from
any other Person; moreover, Borrower shall indicate in its financial statements
that the assets of Borrower are not available to satisfy the claims of
creditors of any Affiliate of Borrower and that the assets of any Affiliate of
Borrower are not available to satisfy the claims of creditors of Borrower and,
except with appropriate designation as set forth above, Borrower shall not
authorize its assets or liabilities to be listed on the financial statement of
any other Person;


 


(n)                                 has been and will be, and at all times has
held and will hold itself out to the public as, a legal entity separate and
distinct from any other Person (including any of its partners, members,
shareholders, trustees, beneficiaries, principals and Affiliates, and any
Affiliates of any of the same), and not as a department or division of any
Person;


 


(o)                                 has and will file such tax returns with
respect to itself as may be required under applicable law and has prepared and
will prepare separate tax returns and financial statements, or if part of a
consolidated group, is shown as a separate member of such group;


 


(p)                                 has paid and shall pay its own liabilities,
indebtedness, and obligations of any kind, as the same shall become due, from
its own separate assets, rather than from those of other Persons, and Borrower
shall not consent to any Person operating the Mortgaged Property to incur
expenses as agent or on behalf of Borrower, unless such Person agrees, prior to
incurring such expense, to clearly indicate that such expenses are the sole
responsibility of, and any payment will come from, Borrower;


 


(q)                                 has not and will not enter into any
transaction of merger or consolidation, or acquire by purchase or otherwise all
or substantially all of the business or assets of, or any stock or beneficial
ownership of, any Person;


 


(r)                                    has not commingled and will not commingle or
permit to be commingled its funds or other assets with those of any other
Person; and has held and will hold title to all of its real and personal
property in its own name and not in the name of any other Person;


 


(s)                                  has maintained and will maintain its assets in
such a manner that it is not costly or difficult to segregate, ascertain or
identify its individual assets from those of any other Person;


 


(t)                                    has not, does not and will not hold itself
out to be responsible for the debts or obligations of any other Person and,
except for the Loan Documents to which other Persons are party, shall not
consent to any other Person holding itself out as being responsible for the
debts or obligations of Borrower;


 


(u)                                 has not and will not assume, guarantee or
otherwise become liable on or in connection with any obligation of any other
Person and, except for the Loan Documents to which


 


103

















 


other Persons are party, shall not consent to any
other Person guaranteeing, assuming or otherwise becoming liable for any
obligation of Borrower;


 


(v)                                 except for funds deposited into the Local
Collection Account, the Collection Account or the Reserve Accounts in
accordance with the Loan Documents, has not and shall not hold title to its
assets other than in its name;


 


(w)                               complies and shall at all times hereafter
comply with all of the assumptions, statements, certifications,
representations, warranties and covenants regarding or made by it contained in
or appended to the nonconsolidation opinion delivered pursuant hereto;


 


(x)                                   has paid and will pay its own liabilities and
expenses, out of its own funds and shall not consent to any other Person paying
Borrower’s obligations except to the extent that timely reimbursement is made
for the same;


 


(y)                                 has held and will hold regular meetings, as
appropriate to conduct its business and has observed at all times and will
observe all limited liability company formalities and record keeping;


 


(z)                                   has allocated and will allocate to Borrower
reasonably and on the basis of fair market value determined on an arms-length
basis all general overhead and administrative expenses, including all costs
associated with common employees and shared office space, any such allocation
shall be specifically and reasonably documented and substantiated, any such
allocation of expenses to Borrower shall be paid solely by Borrower from
Borrower’s own funds, and Borrower shall at all times use separate stationary,
letterhead, invoices and checks;


 


(aa)                            has not and will not identify its members or
partners, Independent Manager (as defined below) or any other member or partner
of any Affiliate of Borrower, or any other Person, as a division or part of it;


 


(bb)                          has paid and will pay the salaries of its own
employees and has maintained and will maintain a sufficient number of employees
in light of its contemplated business operations;


 


(cc)                            has maintained, currently maintains, and will
continue to maintain, its own cash, cash positions and bank accounts separate
from any other Person;


 


(dd)                          shall not (i) liquidate or dissolve, in whole
or in part; (ii) consolidate, merge or enter into any form of consolidation
with or into any other Person, nor convey, transfer or lease its assets
substantially as an entirety to any Person nor permit any Person to
consolidate, merge or enter into any form of consolidation with or into itself,
nor convey, transfer or lease its assets substantially as an entirety to any
Person; (iii) engage in any business other than the ownership and operation of
the Mortgaged Property; or (iv) amend any provisions of its organizational
documents containing provisions similar to those contained in this Article
VIII;


 


(ee)                            is a limited liability company duly formed
and existing under the laws of the State of Delaware with one (1) equity member
(the “Single Member”) in addition to the Independent Manager, whose
limited liability company agreement (the “Borrower


 


104

















 


Organizational Documents”) contains each of the representations,
covenants and warranties set forth in this Article VIII and requires
Borrower to at all times cause there to be at least one (1) duly appointed
independent director or independent manager, as applicable, who is a natural
person and also a non-economic member of Borrower (each, an “Independent
Director/Manager”) whose affirmative vote will be required in order for a
voluntary filing for protection under the Bankruptcy Code or similar action by
Borrower and who is not at the time of such individual’s initial appointment as
Independent Director/Manager, shall not be during such individual’s tenure as
Independent Director/Manager, and may not have been at any time during the
preceding five years, (i) a shareholder, member or partner of, or an officer,
manager, director, except in his or her capacity as Independent
Director/Manager of Borrower, paid consultant or employee of, customer of or
supplier to or a member of the immediate family of Borrower (except in his or
her capacity as Independent Director/Manager of Borrower) or any of its
shareholders, members, partners, subsidiaries or affiliates or (ii) any person
or other entity controlling or under common control with any such shareholder,
member, partner, officer, manager, director, employee, supplier or customer or
any member of the immediate family of any of them; provided, however,
that the foregoing limitations on the use of persons who are Affiliates of
Borrower as Independent Director/Manager shall not apply to Borrower’s use of
natural persons employed by CT Corporation or any reputable, national service
similar to CT Corporation and reasonably approved by Lender to fill the
position of Independent Director/ Manager required hereunder, notwithstanding
that such persons may also act as independent directors of such Affiliates of
Borrower, so long as such Independent Director/Manager does not derive more
than 5% of his/her annual income from serving as director/manager of Affiliates
of Borrower.  As used herein, the term “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a person or entity, whether
through ownership of voting securities, by contract or otherwise;


 


(ff)                                has complied and will comply with the
separateness provisions of the Organizational Documents since such
Organizational Documents were executed and delivered, and with the laws of the
state of its formation relating to limited liability companies;


 


(gg)                          with respect to any entity comprising the
Borrower that is a limited liability company, the Organizational Documents
provide and shall at all times continue to provide that upon the occurrence of
any event that causes the Single Member to cease to be a member of Borrower,
the Independent Director/Manager shall, without action of any person and
simultaneously with the Single Member ceasing to be a member of Borrower,
automatically continue as a member of such Borrower and shall continue Borrower
without dissolution;


 


(hh)                          with respect to any entity comprising the
Borrower that is a limited liability company, Borrower shall cause reputable
Delaware counsel acceptable to Lender (the “Delaware Law Firm”) to
deliver to Lender an opinion letter reasonably satisfactory to Lender, whereby
the Delaware Law Firm opines (which opinion may be subject to standard
assumptions, qualifications, limitations and exceptions acceptable to Lender),
among other requirements of Lender, that: (1) the unanimous consent of the
Single Member and the Independent Manager is required in order for the
applicable Borrower to file a voluntary bankruptcy petition; (2) the provision
in Organizational Documents that requires unanimous consent as a condition to
filing a voluntary bankruptcy petition is enforceable against the Single
Member; (3) the bankruptcy, dissolution, liquidation or death of the Single
Member will not cause the applicable Borrower to


 


105

















 


be dissolved; (4) no creditor of the Single Member
shall have the right to obtain possession of, or otherwise exercise legal or
equitable remedies with respect to, the applicable Borrower’s property; and (5)
Delaware law, not federal law, governs the determination of what persons or
entities have the authority to file a voluntary bankruptcy petition on behalf
of the applicable Borrower;


 


(ii)                                  the Organizational Documents provide and
shall at all times continue to provide that Borrower shall not cause, permit,
or empower the Single Member, manager, or any other person to consolidate or
merge Borrower into any other entity, or, without the affirmative vote and
express written authorization of all members or partners of Borrower and the
Independent Director/Manager, to institute proceedings to have Borrower
adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against Borrower or file a petition seeking or
consent to, reorganization or relief with respect to Borrower under any
applicable federal or state law relating to bankruptcy, or consent to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of Borrower or a substantial part of Borrower’s property, or make any
assignment for the benefit of creditors of Borrower, or admit in writing
Borrower’s inability to pay its debts generally as they become due, or take
action in furtherance of any such action; and


 


(jj)                                  the Borrower Organizational Documents provide
and shall at all times continue to provide (i) that Borrower shall at all times
maintain an arms-length relationship with any Affiliates of Borrower, (ii) that
Borrower shall at all times maintain independent management over its daily
business affairs, free from any control exercised by any Affiliate of Borrower,
and (iii) that to the extent that control of Borrower is exercised by any
manager, and the same individual acts as manager or similar control person with
respect to any Affiliate of Borrower, such individual will act in accordance
with the separateness requirements of the Loan Documents and Borrower
Organizational Documents, including, without limitation (A) an express
requirement under the Borrower Organizational Documents that the manager of
Borrower make all decisions regarding the business of Borrower independent of,
and not dictated by, any Affiliate of the Borrower, and (B) the provisions of
the Loan Documents and the Borrower Organizational Documents relating to
transactions with Affiliates of Borrower and conflicts of interest.


 


ARTICLE IX.

MISCELLANEOUS


 


Section
9.1.                                   Survival.  This Agreement and all
covenants, agreements, representations and warranties made herein and in the
certificates delivered pursuant hereto shall survive the execution and delivery
of this Agreement, the making the Loan hereunder and the execution and delivery
by Borrower to Lender of the Loan Documents, and shall continue in full force
and effect so long as any portion of the Indebtedness is outstanding and
unpaid.  Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the successors and assigns of such party. 
All covenants, promises and agreements in this Agreement contained, by
or on behalf of Borrower, shall inure to the benefit of the respective
successors and assigns of Lender. 
Nothing in this Agreement or in any other Loan Document, express or
implied, shall give to any Person other than the parties and the holder of the
Note and


 


106

















 


the other Loan Documents, and their legal
representatives, successors and assigns, any benefit or any legal or equitable
right, remedy or claim hereunder.


 


Section
9.2.                                   Lender’s Discretion. 
Whenever pursuant to this Agreement, Lender exercises any right given to
it to approve or disapprove, or any arrangement or term is to be satisfactory
to Lender, the decision of Lender to approve or disapprove or to decide whether
arrangements or terms are satisfactory or not satisfactory shall (except as is
otherwise specifically herein provided) be in the sole discretion of Lender and
shall be final and conclusive.


 


Section
9.3.                                   Governing Law.


 


This
Agreement was negotiated in New York and made by Lender and accepted by
Borrower in the State of New York, and the proceeds of the Note delivered
pursuant hereto were disbursed from New York, which State the parties agree has
a substantial relationship to the parties and to the underlying transaction
embodied hereby, and in all respects (including, without limitation, matters of
construction, validity, performance, and maximum permissible rates of
interest), this Agreement and the obligations arising hereunder shall be
governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts made and performed in such State and any
applicable law of the United States of America, except that at all times the
provisions for the creation, perfection and enforcement of the liens and
security interests created pursuant to each Mortgage and Assignment of Rents
and Leases shall be governed by the laws of each State where the related
Mortgaged Property is located, except that the security interests in Account
Collateral shall be governed by the laws of the State of New York or the State
where the Account Collateral is held, at the option of Lender..


 


(a)                                  Borrower hereby consents to the jurisdiction
of any federal court or state court in New York, New York or within the county
and state in which any Mortgaged Property is located and irrevocably agrees
that, subject to Lender’s election, any legal suit, action or proceeding against
Lender or Borrower arising out of or relating to this Agreement or the other
Loan Documents may be instituted and litigated in such courts.  Borrower hereby (i) irrevocably waives, to
the fullest extent permitted by applicable law, any objection which it may now
or hereafter have to the laying of venue of any such suit, action or proceeding
brought in such a court and any claim that any such proceeding brought in such
a court has been brought in an inconvenient forum, and (ii) irrevocably submits
to the jurisdiction of any such court in any such suit, action or
proceeding.  Borrower does hereby
designate and appoint Corporation Service Company, as its authorized agent to
accept and acknowledge on its behalf service of any and all process which may
be served in any such suit, action or proceeding in any federal or state court
in New York, New York, and agrees that service of process upon said agent at
said address (or at such other office in New York, New York as may be
designated by Borrower from time to time in accordance with the terms hereof)
with a copy to Borrower at its principal executive offices, and written notice
of said service of Borrower mailed or delivered to Borrower in the manner
provided herein shall be deemed in every respect effective service of process
upon Borrower, in any such suit, action or proceeding in the State of New
York.  Borrower (i) shall give prompt
notice to Lender of any change in address of its authorized agent hereunder,
(ii) may at any time and from time to time designate a substitute authorized
agent with an office in New York, New York (which office shall be designated as
the address for service of process), and (iii) shall


 


107

















 


promptly designate such a substitute if its
authorized agent ceases to have an office in New York, New York or is dissolved
without leaving a successor.


 


Section
9.4.                                   Modification, Waiver in Writing.  No
modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement or any other Loan Document, or consent or waiver
referred to in any Loan Document or consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be in a
writing signed by the party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the specific instance, and for the
purpose, for which given.  Except as
otherwise expressly provided herein, no notice to or demand on Borrower shall
entitle Borrower to any other or future notice or demand in the same, similar
or other circumstances.


 


Section
9.5.                                   Delay Not a Waiver. 
Neither any failure nor any delay on the part of Lender in insisting
upon strict performance of any term, condition, covenant or agreement, or
exercising any right, power, remedy or privilege hereunder, or under any other
Loan Document, or any other instrument given as security therefor, shall
operate as or constitute a waiver thereof, nor shall a single or partial
exercise thereof preclude any other future exercise, or the exercise of any
other right, power, remedy or privilege. 
In particular, and not by way of limitation, by accepting payment after
the due date of any amount payable under this Agreement, the Note or any other
Loan Document, Lender shall not be deemed to have waived any right either to
require prompt payment when due of all other amounts due under this Agreement,
the Note or the other Loan Documents, or to declare a default for failure to
effect prompt payment of any such other amount.


 


Section
9.6.                                   Notices.  All notices, consents,
approvals and requests required or permitted hereunder or under any other Loan
Document shall be given in writing and shall be effective for all purposes if
delivered or sent by: (a) hand delivery, (b) certified or registered United
States mail, postage prepaid, (c) nationally recognized overnight delivery
service, (d) by facsimile transmission, addressed if to Lender or to Borrower
at its applicable address set forth on Schedule 5 hereto, or at such
other address and Person as shall be designated from time to time by any party
hereto, as the case may be, in a written notice to the other parties hereto in
the manner provided for in this Section 8.6, or (e) other than with
respect to an amendment or modification, an electronic medium.  A notice shall be deemed to have been given:
in the case of hand delivery, at the time of delivery; in the case of
registered or certified mail, when delivered or three Business Days after mailing;
in the case of overnight delivery and facsimile transmission, on the Business
Day after the same was sent; or in the case of electronic medium, when
confirmed by e-mail.  A party receiving
a notice which does not comply with the technical requirements for notice under
this Section 9.6 may elect to waive any deficiencies and treat the
notice as having been properly given. 
Delivery by telecopier of an executed counterpart of any amendment or
waiver of any provision of this Agreement or the Notes or of any Exhibit hereto
to be executed and delivered hereunder shall be effective as delivery of an
original executed counterpart thereof.


 


Section
9.7.                                   TRIAL BY JURY. 
BORROWER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO, WAIVES TRIAL
BY JURY IN ANY ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT
ACTION, BROUGHT


 


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BY ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT,
THE NOTE OR THE OTHER LOAN DOCUMENTS.


 


Section
9.8.                                   Headings.  The Article and Section
headings in this Agreement are included herein for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.


 


Section
9.9.                                   Assignment.


 


(a)                                  Borrower may not sell, assign or transfer any
interest in the Loan Documents, or any portion of the foregoing (including,
without limitation, Borrower’s rights, title, interests, remedies, powers and
duties hereunder and thereunder) without Lender’s prior written consent.  Lender shall have the right to assign or participate
this Agreement and/or its interest in any of the other Loan Documents and the
obligations hereunder to any Person.  In
the event of an assignment by Lender, (a) the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it
would have if it were an original “Lender” hereunder; (b) the assignee shall be
deemed for all purposes to be a “Lender” hereunder; and (c) upon any such
substitution of Lender, a replacement or addition “Lender signature page” shall
be executed by the new Lender and attached to this Agreement and thereupon
become a part of this Agreement.  After
the effectiveness of any assignment, the new Lender shall provide notice to
Borrower of the identity, address and other pertinent information pertaining to
the new Lender.  Notwithstanding
anything in this Agreement to the contrary, after an assignment by Lender, the
“Lender” (prior to such assignment) shall continue to have the benefits of any
rights or indemnifications and shall continue to have the obligations contained
herein which Lender had during the period such party was a “Lender”
hereunder.  Borrower agrees that each
participant shall be entitled to the benefits of Section 2.10 with respect to
its participation in this Agreement or any other Loan Document from time to
time as if such participant were a Lender; provided that, in the case of
Section 2.10, such participant shall have complied with the requirements of
said Section, and provided, further, that no participant shall be entitled to
receive any greater amount pursuant to Section 2.10 than the transferor Lender
would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such participant had no
such transfer occurred.


 


(b)                                 Lender may from time to time elect to enter
into a servicing agreement with a servicer, pursuant to which the servicer
shall be appointed to service and administer the Loan and the Account
Collateral in accordance with the terms hereof and to exercise any and all
other rights of Lender with respect to the Loan as set forth in such servicing
agreement.  Lender shall promptly notify
Borrower if Lender shall elect to appoint or change the servicer, and all
notices and other communications from Borrower to Lender shall be delivered to
the servicer with a copy concurrently delivered to the Lender, and any notice,
direction or other communication from the servicer to Borrower shall have the
same force and effect as a notice, direction or communication from Lender.  The servicer shall be entitled to be
reimbursed for any cost, expense or liability which is incurred by the servicer
pursuant to such servicing and administrative duties and which would otherwise
be reimbursable to Lender under this Agreement or any other Loan Document in
the same manner and to the same extent as if Lender incurred such cost, expense
or liability in the first place.  The
parties hereto acknowledge and


 


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agree that the servicer shall be a third party
beneficiary to this Agreement and the other Loan Documents.


 


Section
9.10.                             Severability. 
Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.


 


Section
9.11.                             Preferences.  Lender shall have no
obligation to marshal any assets in favor of Borrower or any other party or
against or in payment of any or all of the obligations of Borrower pursuant to
this Agreement, the Note or any other Loan Document.  Lender shall have the continuing and exclusive right to apply or
reverse and reapply any and all payments by Borrower to any portion of the
obligations of Borrower hereunder, provided that such application or
reapplication is performed by Lender in accordance with the terms of this
Agreement or any other applicable Loan Document.  To the extent Borrower makes a payment or payments to Lender for
Borrower’s benefit, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Lender.


 


Section
9.12.                             Waiver of Notice. 
Borrower shall not be entitled to any notices of any nature whatsoever
from Lender except with respect to matters for which this Agreement or another
Loan Document specifically and expressly provides for the giving of notice by
Lender to Borrower and except with respect to matters for which Borrower is
not, pursuant to applicable Legal Requirements, permitted to waive the giving
of notice.  Borrower hereby expressly
waives the right to receive any notice from Lender with respect to any matter
for which this Agreement or the other Loan Documents does not specifically and
expressly provide for the giving of notice by Lender to Borrower.


 


Section
9.13.                             Failure to Consent.  If
Borrower shall seek the approval by or consent of Lender hereunder or under the
Note, or any of the other Loan Documents, and Lender shall fail or refuse to
give such consent or approval, then Borrower shall not be entitled to any
damages for any withholding or delay of such approval or consent by Lender, it
being intended that Borrower’s sole remedy shall be to bring an action for an
injunction or specific performance.


 


Section
9.14.                             Schedules Incorporated.  The
information set forth on the cover, heading and recitals hereof, and the
Schedules attached hereto, are hereby incorporated herein as a part of this
Agreement with the same effect as if set forth in the body hereof.


 


Section
9.15.                             Offsets, Counterclaims and Defenses.  Any
assignee of any of Lender’s interest in and to this Agreement and the other
Loan Documents shall take the same free and clear of all offsets, counterclaims
or defenses which are unrelated to this Agreement and the other Loan Documents
which Borrower may otherwise have against any assignor or this


 


110

















 


Agreement and the other Loan Documents.  No such unrelated counterclaim or defense
shall be interposed or asserted by Borrower in any action or proceeding brought
by any such assignee upon this Agreement or upon any other Loan Document.  Any such right to interpose or assert any
such unrelated offset, counterclaim or defense in any such action or proceeding
is hereby expressly waived by Borrower.


 


Section
9.16.                             No Joint Venture or Partnership. 
Borrower and Lender intend that the relationship created hereunder be
solely that of borrower and lender. 
Nothing herein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between Borrower and Lender
nor to grant Lender any interest in the Collateral other than that of secured
party, mortgagee or lender.


 


Section
9.17.                             Waiver of Marshalling of Assets Defense.  To
the fullest extent Borrower may legally do so, Borrower waives all rights to a
marshalling of the assets of Borrower, and others with interests in Borrower,
and of the Collateral, or to a sale in inverse order of alienation in the event
of foreclosure of the interests hereby created, and agrees not to assert any
right under any laws pertaining to the marshalling of assets, the sale in
inverse order of alienation, homestead exemption, the administration of estates
of decedents, or any other matters whatsoever to defeat, reduce or affect the
right of Lender under the Loan Documents to a sale of any Collateral for the
collection of the Indebtedness without any prior or different resort for
collection, or the right of Lender to the payment of the Indebtedness out of
the Net Proceeds of the Collateral in preference to every other claimant
whatsoever.


 


Section
9.18.                             Waiver of Counterclaim.  To
the extent permitted by applicable law, Borrower hereby waives the right to
assert a counterclaim, other than compulsory counterclaim, in any action or
proceeding brought against it by Lender or its agents.


 


Section
9.19.                             Conflict; Construction of Documents.  In
the event of any conflict between the provisions of this Agreement and the
provisions of any of the other Loan Documents, the provisions of this Agreement
shall prevail.  The parties hereto
acknowledge that they were represented by counsel in connection with the
negotiation and drafting of the Loan Documents and that the Loan Documents
shall not be subject to the principle of construing their meaning against the
party that drafted same.


 


Section
9.20.                             Brokers and Financial Advisors. 
Borrower hereby represents that it has dealt with no financial advisors,
brokers, underwriters, placement agents, agents or finders in connection with
the transactions contemplated by this Agreement.  Borrower hereby agrees to indemnify and hold Lender harmless from
and against any and all claims, liabilities, costs and expenses of any kind in
any way relating to or arising from a claim by any Person that such Person
acted on behalf of Borrower in connection with the transactions contemplated
herein.  The provisions of this Section
9.20 shall survive the expiration and termination of this Agreement and the
repayment of the Indebtedness.


 


Section
9.21.                             Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.


 


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Section
9.22.                             Estoppel Certificates. 
Borrower and Lender hereby agree at any time and from time to time upon
not less than fifteen (15) days prior written notice by Borrower or Lender to
execute, acknowledge and deliver to the party specified in such notice, a
statement, in writing, certifying that this Agreement is unmodified and in full
force and effect (or if there have been modifications, that the same, as
modified, is in full force and effect and stating the modifications hereto),
and stating whether or not, to the knowledge of such certifying party, any
Default or Event of Default has occurred and is then continuing, and, if so,
specifying each such Default or Event of Default; provided, however,
that it shall be a condition precedent to Lender’s obligation to deliver the
statement pursuant to this Section 8.22, that Lender shall have
received, together with Borrower’s request for such statement, an Officer’s
Certificate stating that, to the knowledge of Borrower, no Default or Event of
Default exists as of the date of such certificate (or specifying such Default
or Event of Default).


 


Section
9.23.                             Payment of Expenses. 
Borrower shall pay all Transaction Costs, (excluding any Tax Liabilities
which are not payable by the Borrower pursuant to Section 2.10), which shall
include, without limitation, (a) reasonable out-of-pocket costs and expenses of
Lender in connection with (i) the negotiation, preparation, execution and
delivery of the Loan Documents and the documents and instruments referred to
therein; (ii) the creation, perfection or protection of Lender’s Liens in the
Collateral (including, without limitation, fees and expenses for title and lien
searches or amended or replacement Mortgages, UCC financing statements or Collateral
Security Instruments, title insurance premiums and filing and recording fees,
third party due diligence expenses for the Mortgaged Property plus travel
expenses, accounting firm fees, costs of the Appraisals, Environmental Reports
(and an environmental consultant), and the Property Condition Assessments and
costs and fees incurred in connection with arranging, setting up, servicing and
maintaining the Account Collateral); (iii) the administration of the Loan
Documents and the Loan and response to any requests for Lender consent or
approval of any matter; (iv) the negotiation, preparation, execution and
delivery of any amendment, waiver, restructuring or consent relating to any of
the Loan Documents, and (v) the preservation of rights under and enforcement of
the Loan Documents and the documents and instruments referred to therein,
including any communications or discussions relating to any action that
Borrower shall from time to time request Lender to take, as well as any
restructuring or rescheduling of the Indebtedness, (b) the reasonable fees,
expenses and other charges of counsel to Lender or its servicer in connection
with all of the foregoing, and (c) Lender’s reasonable out-of-pocket travel
expenses in connection with site visits to the Mortgaged Property; provided,
that so long as an Event of Default has not occurred and is not continuing, the
Borrower shall not be obligated to pay for Lender’s travel expenses in
connection with more than one site visit to each individual Mortgaged Property
during any twelve consecutive month period and Lender shall use reasonable
efforts to minimize the Transaction Costs paid by Borrower in connection with
such site visits.


 


Section
9.24.                             Non-Recourse. 
Anything contained herein, in the Note or in any other Loan Document to
the contrary notwithstanding, but subject in all respect to provisos (A)
through (E) below, no recourse shall be had for the payment of the principal or
interest on the Loan or for any other Indebtedness, obligation or liability
hereunder or under any other Loan Document or for any claim based hereon or
thereon or otherwise in respect hereof or thereof against (i) any Affiliate of
Borrower (other than Borrower), (ii) any Person owning, directly or indirectly,
any legal or beneficial interest in Borrower or any Affiliate of Borrower 


 


112

















 


(other than Borrower) or (iii) any partner, member,
principal, officer, controlling person, beneficiary, trustee, advisor,
shareholder, employee, agent, Affiliate or director of any Persons described in
clauses (i) through (ii) above (other than Borrower), and it is understood that
neither the Note nor any other Indebtedness, obligation or liability under or
with respect to this Agreement and any other Loan Document may be enforced
against any Person described in clauses (i) through (iii) above
(other than Borrower); provided, however, that the foregoing
provisions of this paragraph shall not:


 


(A)                              prevent recourse to Borrower, the assets of Borrower, the Mortgaged
Property or any other instrument or document which is pledged by Borrower to
Lender pursuant to the Loan Documents, including all Collateral;


 


(B)                                have any applicability whatsoever to or limit the liability of the
parties under the Guaranty of Non-Recourse Obligations; or


 


(C)                                constitute a waiver, release or discharge of any indebtedness or
obligation evidenced by the Note or secured by the Loan Documents, and the same
shall continue until paid or discharged in full;


 


(D)                               prevent recourse to Borrower and Guarantor, jointly and severally, and
their respective assets for repayment of the Indebtedness, and the Indebtedness
shall be fully recourse not only to Borrower but also to Guarantor, in the
event:


 


(1)                                  Borrower or any Affiliate contests or in any
way interferes with, directly or indirectly (collectively, a “Contest”),
any foreclosure action or sale commenced by Lender or with any other
enforcement of Lender’s rights, powers or remedies under any of the Loan
Documents or under any document evidencing, securing or otherwise relating to
any of the Collateral (whether by making any motion, bringing any counterclaim,
claiming any defense, seeking any injunction or other restraint, commencing any
action seeking to consolidate any such foreclosure or other enforcement with
any other action, or otherwise) (except this clause (1) shall not apply if
Borrower or such Affiliate successfully asserts a Contest and obtains a
favorable court order for the Borrower as to same);


 


(2)                                  any Mortgaged Property becomes an asset in a
voluntary bankruptcy or insolvency proceeding or any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed (x) by Borrower or (y) against
Borrower with the consent or acquiescence of Borrower or the Guarantor or their
respective Affiliates;


 


(3)                                  of any Transfer in violation of the terms of
the Loan Documents;


 


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(4)                                  Borrower or the Guarantor makes an assignment
for the benefit of creditors or admits, in writing or in any legal proceeding,
its insolvency or inability to pay its debts as they become due; or


 


(5)                                  of any breach by Borrower or Guarantor under
the Side Agreement; or


 


(E)                                 prevent recourse to Borrower and Guarantor,
jointly and severally, and their respective assets, and Borrower and Guarantor
shall be fully and personally liable, for any loss, costs, liability, damage or
expense (including, without limitation, attorneys’ fees and disbursements)
suffered or incurred by Lender or any Indemnified Party related to or arising
from any of the following acts committed by or on behalf of Borrower, Guarantor
or any of their respective Affiliates:


 


(1)                                  any fraud, misappropriation or misapplication
of funds (including Loss Proceeds or Rents) in contravention of the Loan
Documents, or intentional misrepresentation contained in any Loan Documents or
report furnished pursuant to any Loan Document;


 


(2)                                  additional financing obtained by Borrower
(whether secured or unsecured) in violation of the terms of the Loan Documents;


 


(3)                                  actual material physical waste to the
Mortgaged Property or material damage to the Mortgaged Property resulting from
gross negligence or willful misconduct;


 


(4)                                  of any breach of Article VIII hereof;


 


(5)                                  of any breach of any representation, warranty
or covenant in this Agreement or the Environmental Indemnity Agreement,
concerning Environmental Laws and Hazardous Substances;


 


(6)                                  any security deposits received by Borrower or
Manager from tenants not being properly applied, returned to tenants when due
or delivered to Lender, a receiver or a purchaser of the Mortgaged Property in
the event of a foreclosure sale upon such Person taking possession of the
Mortgaged Property;


 


(7)                                  any Legal Requirement mandating the
forfeiture by Borrower of the Collateral or any portion thereof because of the
conduct or purported conduct of criminal activity by Borrower or any Affiliate
in connection therewith;


 


(8)                                  all costs and expenses, including reasonable
attorneys’ fees and expenses, incurred in enforcing any obligation or liability
or in collecting any amount due under this Section 9.24(D) or this Section
9.24(E), the Environmental Indemnity and the Guaranty of


 


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Non-Recourse Obligations, which, as to Borrower, is a recourse
obligation of Borrower as described in this Section 9.24(D) or this Section
9.24(E), the Environmental Indemnity and the Guaranty of Non-Recourse
Obligations, or, as to Guarantor, is a recourse obligation of Guarantor under
the Guaranty of Non-Recourse Obligations or the Environmental Indemnity;


 


(9)                                  the failure to pay Impositions assessed
against the Mortgaged Property to the extent there was sufficient funds
available to pay and Lender allows Borrower to apply the same, or the failure
to maintain insurance as required under the Loan Documents, or the failure to
pay any deductible amount in respect of any insurance maintained in respect of
the Mortgaged Property, or the failure to pay and discharge any mechanic’s or
materialman’s Liens against the Mortgaged Property to the extent there was
sufficient funds available to pay and discharge and Lender allows Borrower to
apply the same; or


 


(10)                            any Rents or Proceeds received or collected
by Borrower, any Affiliate of Borrower or Manager and not deposited into the
Local Collection Account or the Collection Account in accordance with Section
2.12.


 


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IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their duly authorized representatives, all as of the day and year
first above written.


 


	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  CITIGROUP GLOBAL MARKETS
  REALTY CORP., a New York corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Vadon

  	
   

  
	
   

  	
   

  	
  Name:  David Vadon

  
	
   

  	
   

  	
  Title:Authorized Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  ARC COMMUNITIES 11 LLC, a
  Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott L. Gesell

  	
   

  
	
   

  	
   

  	
  Name:  Scott L. Gesell

  
	
   

  	
   

  	
  Title:Vice President